Required: 1. Allocate the two support departments’ costs to the two operating departments using the following methods: a. Direct method b. Step-down method (allocate MR first) c. Step-down method (allocate US first) d. The Algebraic/reciprocal method. 2. Compare and explain differences in the support-department costs allocated to each production department. 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method?
Required: 1. Allocate the two support departments’ costs to the two operating departments using the following methods: a. Direct method b. Step-down method (allocate MR first) c. Step-down method (allocate US first) d. The Algebraic/reciprocal method. 2. Compare and explain differences in the support-department costs allocated to each production department. 3. What approaches might be used to decide the sequence in which to allocate support departments when using the step-down method?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Required:
1. Allocate the two support departments’ costs to the two operating departments using the
following methods:
a. Direct method
b. Step-down method (allocate MR first)
c. Step-down method (allocate US first)
d. The Algebraic/reciprocal method.
2. Compare and explain differences in the support-department costs allocated to each
production department.
3. What approaches might be used to decide the sequence in which to allocate support
departments when using the step-down method?
Transcribed Image Text:Budgeted
overhead costs
before any inter-
department cost
allocations
Support work
supplied by MR
(Number of
requisitions)
Support work
supplied by US
(Power costs)
SUPPORT
Materials
Utility
Requisitions Services
(US)
$2,000,000 $9,456,000 $13,458,000 $25,314,000
(MR)
$400,000
0
10%
25%
0
PRODUCTION
Machining Assembly Total
40%
30%
35%
60%
100%
100%
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