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Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $265,000, $420,000, and $207,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs to the two production departments and compute the unit costs. The company decided that Administration costs should be allocated on the basis of square footage used by each production and service department. Accounting costs are allocated on the basis of number of employees. Maintenance costs are allocated on the basis of the dollar value of the equipment in each department. The use of each base by all departments during the current period follows. Maintenance Molding Painting Allocation Base Building area Employees Equipment value (in thousands) Administration Accounting 000'91 23 92 $ 228.00 69 $114.00 $171.00 $ 16.50 00 LS $ Direct costs of the Molding Department included $230,000 in direct materials, $345,000 in direct labor, and $117,500 in overhead. The Painting Department's direct costs consisted of $206,000 in direct materials, $174,000 in direct labor, and $80,000 in overhead. Required: a. Using the step method, determine the allocated costs and the total costs in each of the two producing departments. Ignore self- usage (for example, ignore work done by Administration for itself). Rank order the allocation as follows: (1) Maintenance, (2) Accounting, and (3) Administration. b. Assume that 100,000 units were processed through these two departments. What is the unit cost for the sum of direct materials, direct labor, and overhead (1) for Molding, (2) for Painting, and (3) in total?

Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $265,000, $420,000, and $207,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs to the two production departments and compute the unit costs. The company decided that Administration costs should be allocated on the basis of square footage used by each production and service department. Accounting costs are allocated on the basis of number of employees. Maintenance costs are allocated on the basis of the dollar value of the equipment in each department. The use of each base by all departments during the current period follows. Maintenance Molding Painting Allocation Base Building area Employees Equipment value (in thousands) Administration Accounting 000'91 23 92 $ 228.00 69 $114.00 $171.00 $ 16.50 00 LS $ Direct costs of the Molding Department included $230,000 in direct materials, $345,000 in direct labor, and $117,500 in overhead. The Painting Department's direct costs consisted of $206,000 in direct materials, $174,000 in direct labor, and $80,000 in overhead. Required: a. Using the step method, determine the allocated costs and the total costs in each of the two producing departments. Ignore self- usage (for example, ignore work done by Administration for itself). Rank order the allocation as follows: (1) Maintenance, (2) Accounting, and (3) Administration. b. Assume that 100,000 units were processed through these two departments. What is the unit cost for the sum of direct materials, direct labor, and overhead (1) for Molding, (2) for Painting, and (3) in total?

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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MI * 00 B ( CO 因 44 CO %23 Check my w Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $265,000, $420,000, and $207,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs to the two production departments and compute the unit costs. The company decided that Administration costs should be allocated on the basis of square footage used by each production and service department. Accounting costs are allocated on the basis of number of employees. Maintenance costs are allocated on the basis of the dollar value of the equipment in each department. The use of each base by all departments during the current period follows. Used by Administration Accounting Maintenance Molding Painting nces Allocation Base 000 23 000 46 000 92 000 69 Building area Employees Equipment value (in thousands) 000 $ 57.00 $171.00 $ 16.50 $ 228.00 $114.00 Direct costs of the Molding Department included $230,000 in direct materials, $345,000 in direct labor, and $117,500 in overhead. The Painting Department's direct costs consisted of $206,000 in direct materials, $174,000 in direct labor, and $80,000 in overhead. Required: a. Using the step method, determine the allocated costs and the total costs in each of the two producing departments. Ignore self- usage (for example, ignore work done by Administration for itself). Rank order the allocation as follows: (1) Maintenance, (2) Accounting, and (3) Administration. b. Assume that 100,000 units were processed through these two departments. What is the unit cost for the sum of direct materials, direct labor, and overhead (1) for Molding, (2) for Painting, and (3) in total? < Prev 4 of 4 Next IL (CD ツ 4/1 e here to search 直 PrtSc Ins Delete F7 F10 F11 F12 F8 E3 & 3. { G K Alt
Transcribed Image Text:MI * 00 B ( CO 因 44 CO %23 Check my w Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $265,000, $420,000, and $207,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs to the two production departments and compute the unit costs. The company decided that Administration costs should be allocated on the basis of square footage used by each production and service department. Accounting costs are allocated on the basis of number of employees. Maintenance costs are allocated on the basis of the dollar value of the equipment in each department. The use of each base by all departments during the current period follows. Used by Administration Accounting Maintenance Molding Painting nces Allocation Base 000 23 000 46 000 92 000 69 Building area Employees Equipment value (in thousands) 000 $ 57.00 $171.00 $ 16.50 $ 228.00 $114.00 Direct costs of the Molding Department included $230,000 in direct materials, $345,000 in direct labor, and $117,500 in overhead. The Painting Department's direct costs consisted of $206,000 in direct materials, $174,000 in direct labor, and $80,000 in overhead. Required: a. Using the step method, determine the allocated costs and the total costs in each of the two producing departments. Ignore self- usage (for example, ignore work done by Administration for itself). Rank order the allocation as follows: (1) Maintenance, (2) Accounting, and (3) Administration. b. Assume that 100,000 units were processed through these two departments. What is the unit cost for the sum of direct materials, direct labor, and overhead (1) for Molding, (2) for Painting, and (3) in total? < Prev 4 of 4 Next IL (CD ツ 4/1 e here to search 直 PrtSc Ins Delete F7 F10 F11 F12 F8 E3 & 3. { G K Alt
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