Departmental Cost Allocation Logan Products has two production departments—assembly andfinishing. These are supported by two service departments—sourcing (purchasing and handling ofmaterials and human resources) and operations (work scheduling, supervision, and inspection). Loganhas the following labor hours devoted by each of the service departments to the other departments.Total Labor Hours Used by DepartmentsSourcing Operations Assembly FinishingSourcing — 20,000 40,000 60,000Operations 10,000 — 60,000 50,000The costs incurred in the plant are as follows:Departments Departmental CostsSourcing $165,000Operations 205,000Assembly 410,000Finishing 255,000Total $1,035,000Required Use four decimal places (e.g., 33.3333%) in your calculation of percentages.1. What are the costs allocated to the two production departments using (a) the direct method, (b) the stepmethod, when the sourcing department that provides the greatest percentage of services to other servicedepartments goes first), and (c) the reciprocal method?2. What are the total costs in the production departments after allocation?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Departmental Cost Allocation Logan Products has two production departments—assembly and
finishing. These are supported by two service departments—sourcing (purchasing and handling of
materials and human resources) and operations (work
has the following labor hours devoted by each of the service departments to the other departments.
Total Labor Hours Used by Departments
Sourcing Operations Assembly Finishing
Sourcing — 20,000 40,000 60,000
Operations 10,000 — 60,000 50,000
The costs incurred in the plant are as follows:
Departments Departmental Costs
Sourcing $165,000
Operations 205,000
Assembly 410,000
Finishing 255,000
Total $1,035,000
Required Use four decimal places (e.g., 33.3333%) in your calculation of percentages.
1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step
method, when the sourcing department that provides the greatest percentage of services to other service
departments goes first), and (c) the reciprocal method?
2. What are the total costs in the production departments after allocation?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
