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 Materials Utility Requisitions Services Machining Assembly Total (MR) (US) Budgeted costs before any inter- $200,000 $1,000,000 5,456,000 $7,458,000 $14,114,000 department cost allocations Support work supplied by MR 0% 25% 40% 35% 100% (Number of requisitions) Support work supplied by US 10% 0% 30% 60% 100% (Power costs) 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.
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 Materials Utility Requisitions Services Machining Assembly Total (MR) (US) Budgeted costs before any inter- $200,000 $1,000,000 5,456,000 $7,458,000 $14,114,000 department cost allocations Support work supplied by MR 0% 25% 40% 35% 100% (Number of requisitions) Support work supplied by US 10% 0% 30% 60% 100% (Power costs) 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.
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
Materials Utility
Requisitions Services Machining Assembly Total
(MR) (US)
Budgeted costs
before any inter- $200,000 $1,000,000 5,456,000 $7,458,000 $14,114,000
department cost
allocations
Support work
supplied by MR 0% 25% 40% 35% 100%
(Number of
requisitions)
Support work
supplied by US 10% 0% 30% 60% 100%
(Power costs)
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.
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