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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 scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Departments Sourcing Operations Total Labor Hours Used by Departments Assembly 40,000 60,000 Assembly Finishing Total Sourcing 10,000 Sourcing Operations The costs incurred in the plant are as follows: Operations 20,000 Departmental Costs $ 204,000 270,000 436,000 281,000 $ 1,191,000 Finishing 60,000 50,000 Required: 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? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)

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 scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Departments Sourcing Operations Total Labor Hours Used by Departments Assembly 40,000 60,000 Assembly Finishing Total Sourcing 10,000 Sourcing Operations The costs incurred in the plant are as follows: Operations 20,000 Departmental Costs $ 204,000 270,000 436,000 281,000 $ 1,191,000 Finishing 60,000 50,000 Required: 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? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Total Labor Hours Used by Departments Assembly 40,000 60,000 Departments Sourcing Operations Assembly Finishing Total Sourcing Sourcing Operations The costs incurred in the plant are as follows: Operations 20,000 10,000 Departmental Costs 204,000 270,000 436,000 281,000 $ 1,191,000 Finishing 60,000 50,000 Required: 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? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
Transcribed Image Text: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 scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Total Labor Hours Used by Departments Assembly 40,000 60,000 Departments Sourcing Operations Assembly Finishing Total Sourcing Sourcing Operations The costs incurred in the plant are as follows: Operations 20,000 10,000 Departmental Costs 204,000 270,000 436,000 281,000 $ 1,191,000 Finishing 60,000 50,000 Required: 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? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing Total Service Department Cost Allocated Total Production Cost
Transcribed Image Text:a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing Total Service Department Cost Allocated Total Production Cost
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