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 Sourcing Operations Assembly Finishing Sourcing - 20,000 40,000 60,000 Operations 10,000 - 60,000 50,000 The costs incurred in the plant are as follows: Departments Departmental Costs Sourcing $ 174,000 Operations 220,000 Assembly 416,000 Finishing 261,000 Total $ 1,071,000 Required: Use four decimal places (e.g., 33.3333%) in your calculation of percentages. 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 answer to nearest whole dollar amount.)
Item 3
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 | ||||
| Sourcing | Operations | Assembly | Finishing | |
| Sourcing | - | 20,000 | 40,000 | 60,000 |
| Operations | 10,000 | - | 60,000 | 50,000 |
The costs incurred in the plant are as follows:
| Departments | Departmental Costs | ||
| Sourcing | $ | 174,000 | |
| Operations | 220,000 | ||
| Assembly | 416,000 | ||
| Finishing | 261,000 | ||
| Total | $ | 1,071,000 | |
Required:
Use four decimal places (e.g., 33.3333%) in your calculation of percentages.
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 answer to nearest whole dollar amount.)
Answer 1:
Part a:
Direct Method:
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
