a. Direct method?b. Step-down method (allocate MR first)?c. Step-down method (allocate US first)d. The Algebraic/reciprocal method. Caris Company is a manufacturer with two production departments (Machining andAssembly) as well as two support departments (Materials Requisitions and Utility Services).For the last quarter of 2020, Caris's cost records indicate the following:Budgetedoverhead costsbefore any inter-department costallocationsSupport worksupplied by MR(Number ofrequisitions)Support worksupplied by US(Power costs)SUPPORTMaterialsUtilityRequisitions Services(US)$2,000,000(MR)$400,00010%25%0MachiningPRODUCTION40%$9,456,000 $13,458,000 $25,314,00030%Assembly Total35%60%100%100%Required:1. Allocate the two support departments' costs to the two operating departments using thefollowing methods:

The direct method of cost allocation is the simplest method of allocating the cost of service…

Caris 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, Caris's cost records indicate the following:

Caris 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, Caris's cost records indicate the following:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

a. Direct method?

b. Step-down method (allocate MR first)?

c. Step-down method (allocate US first)

d. The Algebraic/reciprocal method.

Caris 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, Caris's cost records indicate the following:
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)
$2,000,000
(MR)
$400,000
10%
25%
0
Machining
PRODUCTION
40%
$9,456,000 $13,458,000 $25,314,000
30%
Assembly Total
35%
60%
100%
100%
Required:
1. Allocate the two support departments' costs to the two operating departments using the
following methods:

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