Direct and step methodsSalado Inc. provides cleaning services through its Residential and Commercial divisions. Support services of thecompany are provided by Personnel and Administration areas. Costs of these two areas are allocated to the revenueproducing departments. Personnel costs are allocated using number of employees; administration costs areallocated using direct department costs. The following annual budgeted information (presented in a benefits-provided ranking) is available:Personnel Administration Residential CommercialDirect costs$420,000Number of employees36Direct labor hoursSquare feet cleaned$540,000$1,440,000$2,400,00090216180,0001,350,000144270,0001,710,000a. Using the direct method, allocate the costs of Personnel and Administration to the Residential and Commercialdivisions.Note: Do not round proportions; round your final answer to the nearest whole dollar.Total support costs allocated to Residential = $Total support costs allocated to Commercial = $454,500505,500b. Using the step method, allocate the costs of Personnel and Administration to the Residential and Commercialdivisions.Note: Do not round proportions; round your final answer to the nearest whole dollar.Total support costs allocated to Residential = $Total support costs allocated to Commercial = $c. Salado prices jobs by the direct labor hour for Residential services and by the square foot cleaned for Commercialservices. Compute the full cost of providing one direct labor hour of service for Residential and for one square footcleaned for Commercial using (1) the direct method and (2) the step method.Note: Round your answers to two decimal places (i.e. round $4.555 to $4.56).(1) Direct MethodResidential cost per hour of service$10.531.7Commercial cost per square foot cleaned $(2) Step MethodResidential cost per hour of service$Commercial cost per square foot cleaned $

Lets understand the basics.Service department costs are allocated to production department using,(1)…

Answered: Direct and step methods Salado Inc.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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compute the budgeted factory overhead rate (i.e., the $ rate per activity base hour, etc.) for department y
Indirect Cost Allocation: Direct MethodSprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded: Melting Department direct overhead $180,000 Molding Department direct overhead 400,000 General plant management 100,000 Plant security 35,000 Other pertinent data follow: Melting Molding Number of employees 30 55 Space occupied (square feet) 10,000 30,000 Machine hours 10,000 2,000 Direct labor hours 4,000 20,000 (a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments.Instructions: Do not round computations until you final…
Support department cost allocation-sequential method Becker Tabletops has two support departments (Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows: Support Department Cost Driver Square footage to be serviced Janitorial Department Cafeteria Department Number of employees Janitorial Department Cafeteria Department Department costs $310,000 $169,000 Square feet Number of employees 50 10 5,000 3 Cutting Department $1,504,000 1,000 Assembly Department $680,000 4,000 30 10 Allocate the support department costs to the production departments using the sequential method. Allocate the support department with the highest department cost first. Janitorial Department Cafeteria Department $ Cutting Department Assembly Department
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The managers of Cheyenne Manufacturing are discussing ways to allocate the cost of service departments, such as quality control and maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control Maintenance Machining Assembly Total Budgeted overhead $374,000 $200,000 $392,000 $272,000 $1,238,000 costs before Allocation Budgeted machine – – 45,000 – 45,000 Hours Budgeted direct – – – 23,000 23,000 labour hours Budgeted hours – 5,000 15,000 5,000 25,000 of service: Quality Control Maintenance 8,000 – 14,400 9,600 32,000
Activity Rates and Product Costs using Activity-Based Costing Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Activity BudgetedActivity Cost Activity Base Casting $338,910 Machine hours Assembly 163,940 Direct labor hours Inspecting 27,500 Number of inspections Setup 34,250 Number of setups Materials handling 38,400 Number of loads Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: Activity Base Entry Dining Total Machine hours 5,440 4,830 10,270 Direct labor hours 4,680 7,030 11,710 Number of inspections 1,900 600 2,500 Number of setups 200 50 250 Number of loads 760 200 960 Units produced 10,800 5,400 16,200 a.…
Activity Rates and Product Costs using Activity-Based Costing Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Activity BudgetedActivity Cost Activity Base Casting $570,000 Machine hours Assembly 80,000 Direct labor hours Inspecting 42,000 Number of inspections Setup 38,000 Number of setups Materials handling 23,750 Number of loads Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: Activity Base Entry Dining Total Machine hours 6,000 13,000 19,000 Direct labor hours 3,000 2,000 5,000 Number of inspections 600 400 1,000 Number of setups 300 200 500 Number of loads 450 500 950 Units produced 6,000 3,000 9,000 a.…
Activity Cost Pools, Activity Rates, and Product Costs using Activity-Based Costing Caldwell Home Appliances Inc. is estimating the activity cost associated with producing ovens and refrigerators. The indirect labor can be traced into four separate activity pools, based on time records provided by the employees. The budgeted activity cost and activity-base formation are provided as follows: Activity Procurement Scheduling Materials handling Product development Total cost Ovens Refrigerators Totals Activity Pool Cost $12,600 90,000 11,000 50,000 $163,600 The estimated activity-base usage and unit information for two product lines was determined as follows: Ovens Refrigerators Number of purchase orders Number of production orders Number of moves Number of engineering changes Number of Purchase Orders 400 300 700 Procurement (per purchase order) Scheduling (per production order) Materials handling (per move) Product development (per engineering change order) Activity Base Number of…
Required Information [The following information applies to the questions displayed below.] Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Department Machining Assembly Maintenance Cafeterial Machining Assembly Direct Costs $100,000 Total Costs 66,400 41,200 33,000 Proportion of Services Used by Maintenance Cafeteria Machining 0.6 0.2 0.5 0.2 Assembly Required: Compute the allocation of service department costs to producing departments using the direct method. (Do not round Intermediate calculations.) 0.3 0.2
Support department cost allocation-direct method Becker Tabletops has two support departments (Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows: Support Department Janitorial Department Cafeteria Department Cost Driver Square footage to be serviced Number of employees Janitorial Department $320,000 Janitorial Department cost allocation Cafeteria Department cost allocation Cafeteria Department $170,000 4,500 3 44 10 Department costs Square feet Number of employees Allocate the support department costs to the production departments using the direct method. Cutting Department $ Cutting Department $1,510,000 $ 700 27 Assembly Department $680,000 6,300 3 Assembly Department

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