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- Support department cost allocation Hooligan Adventure Supply produces and sells various outdoor equipment. The Molding and Assembly production departments are supported by the Personnel and Maintenance departments. Personnel costs are allocated to the production departments based on the number of employees, and Maintenance costs are allocated based on number of service calls. Information about these departments is detailed in the following table: Instructions 1. Assuming that Hooligan Adventure Supply uses the sequential method to allocate its support department costs, which support department does it most likely allocate first? 2. Based on your response in part (1), determine the total costs allocated from each support department to each production department using the sequential method. 3. If Hooligan Adventure Supply wanted to use a more accurate support department cost allocation method, which method should it choose? What might discourage the company from using this method?Allocating selling and administrative expenses using activity-based costing Arctic Air Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows: In addition, the company incurs selling and administrative expenses of 226,250. The company wishes to assign these costs to its three major customers, Gough Industries, Breen Inc., and The Martin Group. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are: Activity-base usage and unit volume information for the three customers is as follows: Instructions 1. Determine the activity rates for each of the three nonmanufacturing activity pools. 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. 4. Provide recommendations to management, based on the profitability reports in (3).Journalizing the distribution of service department costs to production departments Required: Using your solution to P4-7, prepare journal entries for the following: The distribution of the total factory overhead of $79,400 to the individual production and service departments where it originated. The distribution of the Building Maintenance overhead to the appropriate other departments. The distribution of the Factory Office overhead to the appropriate other departments.
- Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating support service costs by switching to the direct method. Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)Wrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units of Simple and 146,100 of Removable, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: Â How much is the overhead allocated to each unit of Simple and Removable?Po.26.
- ManjiTB MC Qu. 11-50 (Algo) Steven Parker owns and operates Steven's Septic Service and... Steven Parker owns and operates Steven's Septic Service and Legal Advice. Steven's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:Clerical:Variable cost: expected number of work orders processedFixed cost: long-run average number of work orders processedJanitorial:Variable cost: labor hoursFixed cost: square footage of space occupiedAverage and expected activity levels for next month (June) are as follows: No. of Work Orders Expected Average Labor Hours Square Footage Septic Service 50 75 1,000 2,295 Legal advice 30 25 1,500 2,805 Clerical 15 15 510 1,710 Janitorial 5 25 310 1,110 Expected costs in the service departments for June are as follows: Clerical Janitorial Variable costs $ 15,400 $ 5,800…Support department cost allocation-reciprocal services method Davis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department are allocated based on asset value. Information about each department is provided in the following table: Maintenance Security Cutting Sewing Department Department Department Department Machine hours 800 2,000 6,800 11,200 Asset value $2,000 $1,450 $3,000 $5,000 Department cost $33,120 $14,720 $67,000 $81,000 Determine the total cost of each production department after allocating all support department costs to the production departments using the reciprocal services method. Cutting Sewing Department Department Production departments total costs
- Support department cost allocation—reciprocal services method Davis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department are allocated based on asset value. Information about each department is provided in the following table: MaintenanceDepartment SecurityDepartment CuttingDepartment SewingDepartment Machine hours 800 2,000 7,600 10,400 Asset value $2,000 $1,400 $3,000 $5,000 Department cost $42,480 $18,880 $61,000 $84,000 Determine the total cost of each production department after allocating all support department costs to the production departments using the reciprocal services method. CuttingDepartment SewingDepartment Production departmentsʼ total costs…Support department cost allocation—reciprocal services method Davis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department are allocated based on asset value. Information about each department is provided in the following table: MaintenanceDepartment SecurityDepartment CuttingDepartment SewingDepartment Machine hours 800 2,000 7,600 10,400 Asset value $2,000 $1,470 $2,500 $5,500 Department cost $41,760 $18,560 $68,000 $78,000 Determine the total cost of each production department after allocating all support department costs to the production departments using the reciprocal services method.Questions: 1. What is the total cost assigned to Capping Department? 2. What is the total cost assigned to Machining Department?