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: Required: 1. Compare and explain differences in the support-department costs allocated to each production department. 2. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method?
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: Required: 1. Compare and explain differences in the support-department costs allocated to each production department. 2. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
Required:
1. Compare and explain differences in the support-department costs allocated to each
production department.
2. What approaches might be used to decide the sequence in which to allocate support
departments when using the step-down method?
Transcribed Image Text:SUPPORT
Materials Utility
Requisitions Services
(MR)
(US)
Budgeted
overhead costs
$200,000
before any inter-
department cost
allocations
Support work
supplied by MR
PRODUCTION
Machining Assembly Total
$1,000,000 $5,456,000 $7,458,000 $14,114,000
0
25%
40%
35%
100%
(Number of
requisitions)
Support work
10%
0
30%
60%
100%
supplied by US
(Power costs)
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