Direct and step methodsSalado Inc. provides cleaning services through its Residential and Commercial divisions. Support services of the companyare provided by Personnel and Administration areas. Costs of these two areas are allocated to the revenue producingdepartments. Personnel costs are allocated using number of employees; administration costs are allocated using directdepartment costs. The following annual budgeted information (presented in a benefits-provided ranking) is available:Direct costsNumber of employeesDirect labor hoursSquare feet cleanedPersonnel Administration Residential Commercial$280,00024$360,000 $960,000$1,600,0006014496120,000900,000180,0001,140,000a. Using the direct method, allocate the costs of Personnel and Administration to the Residential and Commercialdivisions.Note: Do not round proportions; round your final answer to the nearest whole dollar.Total support costs allocated to Residential = $Total support costs allocated to Commercial = $303000337000b. Using the step method, allocate the costs of Personnel and Administration to the Residential and Commercialdivisions.Assume that the departments are listed in a benefits-provided ranking.

Cost allocation is the process wherein the costs are identified and allocated to the appropriate…

Answered: Salado Inc. provides cleaning services…

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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Idris Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Activity Casting Assembly Inspecting Setup Materials handling Budgeted Activity Cost Activity Base $218,960 Machine hours 151,900 Direct labor hours 21,340 Number of inspections 50,760 Number of setups 40,740 Number of loads Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: Activity Base Entry Dining Total Machine hours 5,050 4,470 9,520 Direct labor hours 4,340 6,510 10,850 Number of inspections 1,470 470 1,940 Number of setups 290 70 360 Number of loads 770 200 970 Units produced 10,000 5,000 15,000 a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar. Activity Casting Assembly Inspecting Setup Activity…
Required: a) Using Activity Based Costing, calculate the rate for each cost driver. b) Using activity based budgeting, prepare a budgeted yearly operating statement for Aero3D Ltd. Show the following separately, within the statement. i. The budgeted output for each product per year; ii. The contribution to profits for each product and in total before charging activity based costs; iii. The profit for each product and in total after charging activity based costs but before charging core costs (non-activity based costs); iv. The total profit after charging core based costs.
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The managers of Cheyenne Manufacturing are discussing ways to allocate the cost of service departments, such as quality control and maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control Maintenance Machining Assembly Total Budgeted overhead $374,000 $200,000 $392,000 $272,000 $1,238,000 costs before Allocation Budgeted machine – – 45,000 – 45,000 Hours Budgeted direct – – – 23,000 23,000 labour hours Budgeted hours – 5,000 15,000 5,000 25,000 of service: Quality Control Maintenance 8,000 – 14,400 9,600 32,000
! Required information Problem 17-27 Joint Costs (LO 17-4, 17-5) [The following information applies to the questions displayed below.] Snake River Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard production run incurs joint costs of $430,000 and results in 73,000 units of MSB and 103,000 units of CBL. Each MSB sells for $7, and each unit of CBL sells for $9. Problem 17-27 Part 3 3. Assume the commercial building lumber is not marketable at split-off but must be further planed and sized at a cost of $500,200 per production run. During this process, 11,300 units are unavoidably lost; these spoiled units have no value. The remaining units of commercial building lumber are saleable at $15 per unit. The mine support braces, although saleable immediately at the split-off point, are coated with a tarlike preservative that costs $230,000 per production run.…
The managers of Cheyenne Manufacturing are discussing ways to allocate the cost of service departments, such as quality control and maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control Maintenance Machining Assembly Total Budgeted overhead $374,000 $200,000 $392,000 $272,000 $1,238,000 costs before Allocation Budgeted machine – – 45,000 – 45,000 Hours Budgeted direct – – – 23,000 23,000 labour hours Budgeted hours – 5,000 15,000 5,000 25,000 of service: Quality Control Maintenance 8,000 – 14,400 9,600 32,000
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Fact Pattern: The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Budgeted overhead costs before allocation Budgeted machine hours Budgeted direct labor hours Budgeted hours of service: Quality Control Quality Control $350,000 -- Maintenance Machining Assembly Total $200,000 $400,000 $300,000 $1,250,000 50,000 7,000 -- 25,000 50,000 25,000 21,000 7,000 35,000 Maintenance 10,000 18,000 12,000 40,000 Question: 31f Rochester uses the direct method of allocating service department costs, the total service costs allocated to the assembly department would be
School of Business and School of Education. Each of the operating departments uses the services of the company's two support departments: IT - Department and HR - Department. Additionally, the IT and HR departments use the services of each other. Data concerning the past year are as follows: Support Departments Operating Department IT HR School of School of Department HR - Dept. Business Education Total Budgeted Overhead Cost before any $437,500 $375,120 $ 825,250 $956,330 $2,594,200 departmental cost allocation Support work furnished by IT - Dept. Budgeted IT Salaries 0 $20,000 $80,000 $100,000 $200,000 Percentage 0 10.00% 40.00% 50.00% 100.00% Support work furnished by HR - Dept. Budgeted IT Service hours 1250 0 3,000 2,000 6, 250 Percentage 20.00% 0 48.00 % 32.00 % 100.00% Directions: 1. What are the total overhead costs of the operating departments (Business and Education) after the support - department costs of the IT Dept. and Human Resource Dept. have been allocated using (a)…
Renata Company has four departments: Materials, Personnel, Manufacturing, and Packaging. Information follows. Department Square Feet Asset Values Employees Materials 26 30,000 $ 9,300 Personnel 13 12,000 2,480 Manufacturing Packaging 52 66,000 37,820 39 12,000 12,400 Total 130 120,000 $ 62,000 The four departments share the following indirect expenses for supervision, utilities, and insurance according to their allocation bases. Indirect Expense Supervision Utilities Insurance Total Cost $ 82,700 Number of employees Allocation Base 52,000 Square feet occupied 23,500 Asset values $ 158,200 Allocate each of the three indirect expenses to the four departments.
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