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 (MR) $400,000 0 Utility Materials Requisitions Services (US) $2,000,000 $9,456,000 $13,458,000 $25,314,000 10% 25% 0 Machining Assembly Total PRODUCTION 40% 30% 35% 60% 100% 100%

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 (MR) $400,000 0 Utility Materials Requisitions Services (US) $2,000,000 $9,456,000 $13,458,000 $25,314,000 10% 25% 0 Machining Assembly Total PRODUCTION 40% 30% 35% 60% 100% 100%

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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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

What approaches might be used to decide the sequence in which to allocate support departments when using the step-down 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)
Materials Utility
Requisitions Services
(US)
SUPPORT
0
10%
(MR)
$400,000 $2,000,000 $9,456,000 $13,458,000 $25,314,000
25%
Machining Assembly Total
PRODUCTION
40%
30%
35%
60%
100%
100%

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aris 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: SUPPORT PRODUCTION Materials Requisitions (MR) Utility Services (US) Machining Assembly Total Budgeted overhead costs before any interdepartment cost allocations $400,000 $2,000,000 $9,456,000 $13,458,000 $25,314,000 Support work supplied by MR (Number of requisitions) 0 25% 40% 35% 100% Support work supplied by US (Power costs) 10% 0 30% 60% 100% Required 1. Allocate the two support departments’ costs to the two operating departments using the following method: Step-down method (allocate MR first) Step-down method (allocate US first)
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For the last quarter of 2020, Carica’s cost records indicate the following: Materials Requisitions (MR) Utility Services (US) Machining Assembly Total Budgeted overhead costs before any inter- department cost allocations $200,000 $1,000,000 $5,456,000 $7,458,000 $14,114,000 Support work supplied by MR (Number of requisitions) 0 25% 40% 35% 100% Support work supplied by US (Power costs) 10% 0 30% 60% 100% Questions: 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. Answer quickly
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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: Materials Requisitions (MR) Utility Services (US) Machining Assembly Total Budgeted overhead costs before any inter- department cost allocations $200,000 $1,000,000 $5,456,000 $7,458,000 $14,114,000 Support work supplied by MR (Number of requisitions) 0 25% 40% 35% 100% Support work supplied by US (Power costs) 10% 0 30% 60% 100% Questions: 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 2. Compare and explain differences in the support-department costs allocated to each production and make 6 insight…
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Carica 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, Carica’s cost records indicate the following: Required: 1. Compare and explain differences in the support-department costs allocated to eachproduction department. 2. What approaches might be used to decide the sequence in which to allocate supportdepartments when using the step-down method?
Jingga Sdn Bhd has three production departments - Machining, Assembly and Finishing; and two service departments - Maintenance and Store. The company has produced the following budgeted overhead costs for the year 2023: Allocated costs Insurance of Building Insurance of Machinery Rent on factory General supervision Electricity (lighting) Electricity (power Depreciation of Machinery Other information in respect of the departments is as follows: Machining Assembly Finishing Departments Allocated Costs (RM) Value of Machinery (RM) Kilowatt hours Number of employees 36,000 30,000 38,000 20 500 24,000 60,000 12,000 15,000 20,000 40 Area occupied (square meters) Machine hours Direct labour hours Cost of the service departments should be apportioned as follows: Service Departments 600 30,000 30,000 60,000 5,000 12,000 50 800 10,000 30,000 Production Departments Assembly 20% 25% RM 120,000 96,000 30,000 48,000 74,400 18,000 64,800 72,000 Maintenance Store 18,000 Machining department - machine…
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