Data Master is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Cynthia Moore, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Moore is considering three different methods of allocating overhead costs: the direct method, the step method, and the reciprocal method. Moore assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department. Budgeted Overhead Info Systems (hours) Facilities (Square feet) Service Departments User Departments Info Systems Facilities Computer Program Consulting Training $ 50,000 $25,000 $110,000 $ 85,000 600 900 600,000 800,000 $75,000 1,100 400,000 200,000 information systems are allocated on the basis of hours of computer usage; facilities are allocated on the basis of floor space. Required: Allocate the service department costs to the user departments using the reciprocal method. Round to the nearest whole dollar Total $345,000 3,000 2,000,000

Data Master is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Cynthia Moore, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Moore is considering three different methods of allocating overhead costs: the direct method, the step method, and the reciprocal method. Moore assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department. Budgeted Overhead Info Systems (hours) Facilities (Square feet) Service Departments User Departments Info Systems Facilities Computer Program Consulting Training $ 50,000 $25,000 $110,000 $ 85,000 600 900 600,000 800,000 $75,000 1,100 400,000 200,000 information systems are allocated on the basis of hours of computer usage; facilities are allocated on the basis of floor space. Required: Allocate the service department costs to the user departments using the reciprocal method. Round to the nearest whole dollar Total $345,000 3,000 2,000,000

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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