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odel, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has ree service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments vere $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 nave 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 Accounting Maintenance Molding 54,000 Administration Painting Allocation Base Building area Employees Equipment value (in thousands) 432,000 92 $ 57.00 $ 16.50 $ 228.00 69 $114.00 $171.00 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- Isane Ifor examnle innore work done hv Administration for itself) Rank order the allocation as follows /1 Maintenance (2) < Prev 4 of 4 XON

odel, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has ree service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments vere $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 nave 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 Accounting Maintenance Molding 54,000 Administration Painting Allocation Base Building area Employees Equipment value (in thousands) 432,000 92 $ 57.00 $ 16.50 $ 228.00 69 $114.00 $171.00 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- Isane Ifor examnle innore work done hv Administration for itself) Rank order the allocation as follows /1 Maintenance (2) < Prev 4 of 4 XON

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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+ I/ MI * 00 HI 444 山 SI 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 Painting Molding 432,000 Allocation Base Administration Accounting Maintenance Building area Employees Equipment value (in thousands) 000 9 23 000ʻ 16 000 69 000' 92 $ 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 examnle ianore work done by Administration for itself) Rank order the allocation as follows: (1) Maintenance (2) 4 of 4 ere to search 近 罗1 +DD E3 PrtSc Delete 因 F7 F8 F10 F11 F12 & #3 3. 8. 6. G K. Alt Ctrl
Transcribed Image Text:+ I/ MI * 00 HI 444 山 SI 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 Painting Molding 432,000 Allocation Base Administration Accounting Maintenance Building area Employees Equipment value (in thousands) 000 9 23 000ʻ 16 000 69 000' 92 $ 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 examnle ianore work done by Administration for itself) Rank order the allocation as follows: (1) Maintenance (2) 4 of 4 ere to search 近 罗1 +DD E3 PrtSc Delete 因 F7 F8 F10 F11 F12 & #3 3. 8. 6. G K. Alt Ctrl
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