Compare the total support department costs allocated to each production department under each cost allocation method.a. Which production department is allocated the most support department costs under the direct method?Costb. Which production department is allocated the most support department costs under the sequential method?Costc. Which production department is allocated the most support department costs under the reciprocal services method?Cost

Answered: Compare the total support department…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Compare the total support department costs allocated to each production department under each cost allocation method.
a. Which production department is allocated the most support department costs under the direct method?
Cost
b. Which production department is allocated the most support department costs under the sequential method?
Cost
c. Which production department is allocated the most support department costs under the reciprocal services method?
Cost

Expert Solution

Step 1

Calculation of the total support department costs to the Cutting department under the direct method is as follows:

$\begin{array}{rcl} Allocated costs to cutting department & = & Janitorial Department allocation costs + Cafeteria Department allocation costs \\ = & $62,000 + $ 126, 750 \\ = & $ 188, 750 \end{array}$

Calculation of the total support department costs to the assembly department under the direct method is as follows:

$\begin{array}{rcl} Allocated costs to assembly department & = & Janitorial Department allocation costs + Cafeteria Department allocation costs \\ = & $ 248,000 + $ 42, 250 \\ = & $ 290, 250 \end{array}$

The Assembly department is the production department to which most department costs are allocated.

Step 2

Calculation of the total support department costs to the Cutting department under the sequential method is as follows:

$\begin{array}{rcl} Allocated costs to cutting department & = & Janitorial Department allocation costs + Cafeteria Department allocation costs \\ = & $ 31,000 + $ 243, 000 \\ = & $ 274, 000 \end{array}$

Calculation of the total support department costs to the assembly department under the sequential method is as follows:

$\begin{array}{rcl} Allocated costs to assembly department & = & Janitorial Department allocation costs + Cafeteria Department allocation costs \\ = & $ 124,000 + $ 81, 000 \\ = & $ 205, 000 \end{array}$

Calculation of the total support department costs to the cafeteria department under the sequential method is as follows:

$\begin{array}{rcl} Allocated costs to cafeteria department & = & Janitorial Department allocation costs \\ = & $ 155, 000 \end{array}$

The cutting department is the production department to which most department costs are allocated.

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