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Lhamo Tatenda Lawfirm has two support departments, Administration and Info Tech, and two revenue departments, Civil and Contract. All costs are regarded as strictly variable. Administration allocates cost based on number of employees and Info Tech allocates cost based on service hours. For April, the following is available: Direct Costs Actual Activity: Employees Service Hours REQUIRED: 1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Civil? What is the total cost allocated to Contract? 2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Administration Department cost first. What is the total cost allocated to Civil? What is the total cost allocated Contract? 3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments? Support Departments Administration Info Tech $ 84,000 $ 35,000 192 6 Revenue Departments Civil $ 135,000 $ 75,000 12 Contract 576 6 192

Lhamo Tatenda Lawfirm has two support departments, Administration and Info Tech, and two revenue departments, Civil and Contract. All costs are regarded as strictly variable. Administration allocates cost based on number of employees and Info Tech allocates cost based on service hours. For April, the following is available: Direct Costs Actual Activity: Employees Service Hours REQUIRED: 1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Civil? What is the total cost allocated to Contract? 2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Administration Department cost first. What is the total cost allocated to Civil? What is the total cost allocated Contract? 3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments? Support Departments Administration Info Tech $ 84,000 $ 35,000 192 6 Revenue Departments Civil $ 135,000 $ 75,000 12 Contract 576 6 192

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter4: Job-order Costing And Overhead Application
Section: Chapter Questions
Problem 27BEA: Use the following information for Brief Exercises 4-27 and 4-28: Quillen Company manufactures a...
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Lhamo Tatenda Lawfirm has two support departments, Administration and Info Tech, and two revenue departments, Civil and Contract. All costs are regarded as strictly variable. Administration allocates cost based on number of employees and Info Tech allocates cost based on service hours. For April, the following is available: Direct Costs Actual Activity: Employees Service Hours REQUIRED: 1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Civil? What is the total cost allocated to Contract? 2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Administration Department cost first. What is the total cost allocated to Civil? What is the total cost allocated Contract? 3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments? Support Departments Administration $ 192 84,000 Info Tech $ 35,000 6 Revenue Departments Civil $ 135,000 $ 75,000 12 Contract 576 6 192
Transcribed Image Text:Lhamo Tatenda Lawfirm has two support departments, Administration and Info Tech, and two revenue departments, Civil and Contract. All costs are regarded as strictly variable. Administration allocates cost based on number of employees and Info Tech allocates cost based on service hours. For April, the following is available: Direct Costs Actual Activity: Employees Service Hours REQUIRED: 1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Civil? What is the total cost allocated to Contract? 2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Administration Department cost first. What is the total cost allocated to Civil? What is the total cost allocated Contract? 3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments? Support Departments Administration $ 192 84,000 Info Tech $ 35,000 6 Revenue Departments Civil $ 135,000 $ 75,000 12 Contract 576 6 192
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