Exercise 11-36 (Algo) Cost Allocation: Step Method (LO 11-3) Bens Corporation has three service departments (Repairs, HR, and IT) and two production departments (M1 and M2). The following usage data for each of the service departments for the previous period follow. Repairs HR IT M1 M2 Repairs — 0 % 0 % 40 % 60 % HR 10 % — 20 % 35 % 35 % IT 0 % 10 % — 20 % 70 % The direct costs of the service departments in the previous period were $92,000 for Repairs, $111,600 for HR, and $207,000 for IT. Required: Use the step method to allocate the service department costs to the production departments. Allocate HR costs first, followed by IT, and then Repairs. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Exercise 11-36 (Algo) Cost Allocation: Step Method (LO 11-3)
Bens Corporation has three service departments (Repairs, HR, and IT) and two production departments (M1 and M2). The following usage data for each of the service departments for the previous period follow.
| Repairs | HR | IT | M1 | M2 | |||||||||||
| Repairs | — | 0 | % | 0 | % | 40 | % | 60 | % | ||||||
| HR | 10 | % | — | 20 | % | 35 | % | 35 | % | ||||||
| IT | 0 | % | 10 | % | — | 20 | % | 70 | % | ||||||
The direct costs of the service departments in the previous period were $92,000 for Repairs, $111,600 for HR, and $207,000 for IT.
Required:
Use the step method to allocate the service department costs to the production departments. Allocate HR costs first, followed by IT, and then Repairs. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
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