Seattle Partners provides management consulting services to government and corporate clients. Seattle has two support departments-administrative services (AS) and information systems (IS)–and two operating departments-government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Seattle's cost records indicate the following: E (Click the icon to view the cost records.) The two support departments' costs have been allocated to the two operating departments using the direct method and the step-down method (AS department first) and the step-down method (IS department first). The results of the allocations are as follows: (Click the icon to view the direct method.) (Click the icon to view the step-down method (AS first).) (Click the icon to view the step-down method (IS first).) Read the requirements. (Click the icon to view a summary of the three methods.) Requirement 1a. Allocate the two support departments' costs to the two operating departments using the reciprocal method. First, determine the linear equations for each support department. AS= IS= Data table SUPPORT OPERATING AS IS GOVT CORP Total Budgeted overhead costs before any interdepartment cost allocations Support work supplied by AS (budgeted head count) Support work supplied by IS (budgeted computer time) $ 390,000 $ 3,600,000 $ 8,700,000 $ 12,470,000 $ 25,160,000 20% 48% 32% 100% 10% 36% 54% 100% Print Done
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Support Departments
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Operating Departments
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Step-down Method
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AS
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IS
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GOVT
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CORP
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Total
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Budgeted
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before interdepartment cost allocations
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$390,000
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$3,600,000
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$8,700,000
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$12,470,000
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$25,160,000
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Allocation of IS costs
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360,000
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(3,600,000)
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1,296,000
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1,944,000
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$750,000
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$0
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Allocation of AS costs
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(750,000)
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450,000
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300,000
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Total budgeted overhead of operating departments
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$0
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$10,446,000
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$14,714,000
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$25,160,000
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GOVT
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CORP
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Direct method
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$1,674,000
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$2,316,000
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Step-down (AS first)
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1,658,400
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2,331,600
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Step-down (IS first)
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1,746,000
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2,244,000
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