Carica Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Materials Requisitions and Utility Services). For the last quarter of 2020, Carica's cost records indicate the following: SUPPORT PRODUCTION \table[[, \table[[Materials], [Requisitions], [(MR)]], \table [[Utility], [Services], [(US )]], Machining, Assembly, Total], [\table [[Budgeted], [overhead costs], [before any inter-], [department cost], [allocations]], $200,000, $1,000,000, $5, 456, 000, $7,458, 000, $14, 114,000 Required: 1. Allocate the two support departments 'costs to the two operating departments using the following methods: a. Direct method b. Step-down method ( allocate MR first) c. Step-down method (allocate US first) d. The Algebraic method. 2. Compare and explain differences in the support - department costs allocated to each production department. 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? Budgeted overhead costs before any inter- department cost allocations Support work supplied by MR (Number of requisitions) Support work supplied by US (Power costs) SUPPORT Materials Utility Requisitions Services (US) 0 10% 3 25% (MR) $200,000 $1,000,000 $5,456,000 $7,458,000 $14,114,000 0 C PRODUCTION Machining Assembly Total 40% 30% 35% 60% 100% 100%
Carica Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Materials Requisitions and Utility Services). For the last quarter of 2020, Carica's cost records indicate the following: SUPPORT PRODUCTION \table[[, \table[[Materials], [Requisitions], [(MR)]], \table [[Utility], [Services], [(US )]], Machining, Assembly, Total], [\table [[Budgeted], [overhead costs], [before any inter-], [department cost], [allocations]], $200,000, $1,000,000, $5, 456, 000, $7,458, 000, $14, 114,000 Required: 1. Allocate the two support departments 'costs to the two operating departments using the following methods: a. Direct method b. Step-down method ( allocate MR first) c. Step-down method (allocate US first) d. The Algebraic method. 2. Compare and explain differences in the support - department costs allocated to each production department. 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? Budgeted overhead costs before any inter- department cost allocations Support work supplied by MR (Number of requisitions) Support work supplied by US (Power costs) SUPPORT Materials Utility Requisitions Services (US) 0 10% 3 25% (MR) $200,000 $1,000,000 $5,456,000 $7,458,000 $14,114,000 0 C PRODUCTION Machining Assembly Total 40% 30% 35% 60% 100% 100%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Carica Company is a manufacturer with two production departments (Machining and Assembly) as well as two support
departments (Materials Requisitions and Utility Services). For the last quarter of 2020, Carica's cost records indicate
the following: SUPPORT PRODUCTION \table[[, \table[[Materials], [Requisitions], [(MR)]], \table [[Utility], [Services], [(US
)]], Machining, Assembly, Total], [\table [[Budgeted], [overhead costs], [before any inter-], [department cost], [allocations]],
$200,000, $1,000,000, $5, 456, 000, $7,458, 000, $14, 114,000 Required: 1. Allocate the two support departments
'costs to the two operating departments using the following methods: a. Direct method b. Step-down method (
allocate MR first) c. Step-down method (allocate US first) d. The Algebraic method. 2. Compare and explain
differences in the support - department costs allocated to each production department. 3. What approaches might be
used to decide the sequence in which to allocate support departments when using the step-down method?
Budgeted
overhead costs
before any inter-
department cost
allocations
Support work
supplied by MR
(Number of
requisitions)
Support work
supplied by US
(Power costs)
SUPPORT
Materials
Utility
Requisitions Services
(US)
0
10%
3
25%
(MR)
$200,000 $1,000,000 $5,456,000 $7,458,000 $14,114,000
0
C
PRODUCTION
Machining Assembly Total
40%
30%
35%
60%
100%
100%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F230eb048-9357-4983-85aa-26ce4bae6f14%2F946b7e85-b5c4-48f2-96b7-160d1d328e7b%2Fw2tnjo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Carica Company is a manufacturer with two production departments (Machining and Assembly) as well as two support
departments (Materials Requisitions and Utility Services). For the last quarter of 2020, Carica's cost records indicate
the following: SUPPORT PRODUCTION \table[[, \table[[Materials], [Requisitions], [(MR)]], \table [[Utility], [Services], [(US
)]], Machining, Assembly, Total], [\table [[Budgeted], [overhead costs], [before any inter-], [department cost], [allocations]],
$200,000, $1,000,000, $5, 456, 000, $7,458, 000, $14, 114,000 Required: 1. Allocate the two support departments
'costs to the two operating departments using the following methods: a. Direct method b. Step-down method (
allocate MR first) c. Step-down method (allocate US first) d. The Algebraic method. 2. Compare and explain
differences in the support - department costs allocated to each production department. 3. What approaches might be
used to decide the sequence in which to allocate support departments when using the step-down method?
Budgeted
overhead costs
before any inter-
department cost
allocations
Support work
supplied by MR
(Number of
requisitions)
Support work
supplied by US
(Power costs)
SUPPORT
Materials
Utility
Requisitions Services
(US)
0
10%
3
25%
(MR)
$200,000 $1,000,000 $5,456,000 $7,458,000 $14,114,000
0
C
PRODUCTION
Machining Assembly Total
40%
30%
35%
60%
100%
100%
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