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 Assembly Finishing Total Sourcing Operations The costs incurred in the plant are as follows: Direct Method Assendly Finishing bStep Method urcing 10,000 Assembly Finishing Reciprocal Method Total Labor Hours Used by Degertrints Operations 20,000 Fisting Departmental Costs $207,000 275,000 438,000 285,000 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.) Assembly 40,000 60,000 Total Service Department Cost Allocated finishing 50,000 Total Production Come
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 Assembly Finishing Total Sourcing Operations The costs incurred in the plant are as follows: Direct Method Assendly Finishing bStep Method urcing 10,000 Assembly Finishing Reciprocal Method Total Labor Hours Used by Degertrints Operations 20,000 Fisting Departmental Costs $207,000 275,000 438,000 285,000 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.) Assembly 40,000 60,000 Total Service Department Cost Allocated finishing 50,000 Total Production Come
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Departments
Sourcing
Operations
Sourcing
Operations
10,000
The costs incurred in the plant are as follows:
Assembly
Finishing
Total
a Direct Method
Assembly
Finishing
bStep Method
Sourcing
Assembly
Finishing
Reciprocal Method
Total Labor Hours used by Departments
Operations
20,000
Assely
40,000
60,000
Assembly
Finishing
Departmental
Costs
$207,000
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.)
275.000
438,000
285,000
Total Service
Department Cost
Finishing
60,000
50,000
Total Production
Com
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Step 1: Introduction of cost of production and Overhead
VIEWStep 2: Calculation of Allocated overhead as per direct method
VIEWStep 3: Calculation of Allocated overhead as per Step method
VIEWStep 4: Calculation of Allocated overhead as per Reciprocal method
VIEWStep 5: Total cost in the production department after allocation
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