Required information [The following information applies to the questions displayed below.] Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities: Budgeted overhead (base) Information Systems (computer hours) Facilities (square feet) C. a. Direct Method b. Service Departments Information Systems Facilities $ 368,000 $ 184,000 600 Step Method (Information Systems Goes First) Step Method (Facilities Goes First) Reciprocal method 240 Computer Programming $ 736,000 1,200 960 Production Departments Information Systems Consulting $ 874,000 Required: 1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments and determine the total cost of each production department using these three methods: a. Direct method. p. Step method (both for the information systems department going first and for the facilities department going first). c. Reciprocal method. Programming Consulting For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $ Clue to rounding.) 300 600 Training Software Training Total $575,000 $ 2,737,000 900 600 3,000 2,400 Total
Required information [The following information applies to the questions displayed below.] Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities: Budgeted overhead (base) Information Systems (computer hours) Facilities (square feet) C. a. Direct Method b. Service Departments Information Systems Facilities $ 368,000 $ 184,000 600 Step Method (Information Systems Goes First) Step Method (Facilities Goes First) Reciprocal method 240 Computer Programming $ 736,000 1,200 960 Production Departments Information Systems Consulting $ 874,000 Required: 1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments and determine the total cost of each production department using these three methods: a. Direct method. p. Step method (both for the information systems department going first and for the facilities department going first). c. Reciprocal method. Programming Consulting For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $ Clue to rounding.) 300 600 Training Software Training Total $575,000 $ 2,737,000 900 600 3,000 2,400 Total
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Required information
[The following information applies to the questions displayed below.]
Data Performance, a computer software consulting company, has three major functional areas: computer programming,
information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total
costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs,
Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the
direct method, the step method, and the reciprocal method. She assembled the following data from the two service
departments, information systems and facilities:
a.
b.
Budgeted overhead (base)
Information Systems (computer hours)
Facilities (square feet)
C.
Service Departments
Information
Systems
$ 368,000
240
Direct Method
Step Method (Information Systems Goes First)
Step Method (Facilities Goes First)
Reciprocal method
Computer
Facilities Programming
$ 184,000 $ 736,000
600
1,200
960
Required:
1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the
application base for the facilities department, apply overhead from these service departments to the production departments and
determine the total cost of each production department using these three methods:
a. Direct method.
b. Step method (both for the information systems department going first and for the facilities department going first).
c. Reciprocal method.
(For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $1
due to rounding.)
Production Departments
Information
Systems Software
Consulting
Training
Total
$ 874,000
300
$ 575,000 $ 2,737,000
900
3,000
600
600
2,400
Programming Consulting
Training
Total](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb37f5f3f-60f0-49bc-a26d-ab9a7e83ee02%2F5c181c96-b79b-4bd8-bcf9-9532498d8054%2Fd6ont5g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Data Performance, a computer software consulting company, has three major functional areas: computer programming,
information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total
costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs,
Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the
direct method, the step method, and the reciprocal method. She assembled the following data from the two service
departments, information systems and facilities:
a.
b.
Budgeted overhead (base)
Information Systems (computer hours)
Facilities (square feet)
C.
Service Departments
Information
Systems
$ 368,000
240
Direct Method
Step Method (Information Systems Goes First)
Step Method (Facilities Goes First)
Reciprocal method
Computer
Facilities Programming
$ 184,000 $ 736,000
600
1,200
960
Required:
1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the
application base for the facilities department, apply overhead from these service departments to the production departments and
determine the total cost of each production department using these three methods:
a. Direct method.
b. Step method (both for the information systems department going first and for the facilities department going first).
c. Reciprocal method.
(For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $1
due to rounding.)
Production Departments
Information
Systems Software
Consulting
Training
Total
$ 874,000
300
$ 575,000 $ 2,737,000
900
3,000
600
600
2,400
Programming Consulting
Training
Total
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Step 1: introduction to various methods of cost allocation
VIEWStep 2: Computation of percentage of Computer hours and Square feet
VIEWStep 3: Part a Cost allocation using Direct method
VIEWStep 4: Part 2 Computatio of Cost allocation using Step Method (Info. system First)
VIEWStep 5: Cost allocation using Step Method (Facilities First)
VIEWStep 6: Cost allocation using Reciprocal Method
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