Support Department Cost Allocation-Direct Method Christmas Timber, Inc., produces Christmas trees. The trees are produced through a cutting and pruning process. Machine maintenance and janitorial labors are performed throughout the production process by nonproduction employees. Maintenance and janitorial costs are allocated based on machine hours used and the number of trees in each department, respectively. The company estimates that the cutting and pruning areas typically have about 6 and 54 trees, respectively, in them at 1 time. The company also estimates that the cutting process requires about 9 times as many machine hours as the pruning process. The total costs of each department are as follows: Maintenance Department Janitorial Department Cutting Department. Pruning Department $9,000 6,000 55,000 10,000 Using the direct method of support department cost allocation, determine the total cost of each production department after allocating all support costs to the production departments. Feedback Production departments total costs $ Cutting Department Pruning Department X Check My W The direct method allocates all support department costs directly to production departments. The usage of the support department cost drivers by each department must be determined. Under the direct method, any inter-support-department usages are ignored. The percentage usage of support department cost drivers by the production departments is determined. The support department costs are allocated to the production departments by multiplying the percentage usage of each production department by the total support department costs.
Support Department Cost Allocation-Direct Method Christmas Timber, Inc., produces Christmas trees. The trees are produced through a cutting and pruning process. Machine maintenance and janitorial labors are performed throughout the production process by nonproduction employees. Maintenance and janitorial costs are allocated based on machine hours used and the number of trees in each department, respectively. The company estimates that the cutting and pruning areas typically have about 6 and 54 trees, respectively, in them at 1 time. The company also estimates that the cutting process requires about 9 times as many machine hours as the pruning process. The total costs of each department are as follows: Maintenance Department Janitorial Department Cutting Department. Pruning Department $9,000 6,000 55,000 10,000 Using the direct method of support department cost allocation, determine the total cost of each production department after allocating all support costs to the production departments. Feedback Production departments total costs $ Cutting Department Pruning Department X Check My W The direct method allocates all support department costs directly to production departments. The usage of the support department cost drivers by each department must be determined. Under the direct method, any inter-support-department usages are ignored. The percentage usage of support department cost drivers by the production departments is determined. The support department costs are allocated to the production departments by multiplying the percentage usage of each production department by the total support department costs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Transcribed Image Text:Support Department Cost Allocation-Direct Method
Christmas Timber, Inc., produces Christmas trees. The trees are produced through a cutting and pruning process. Machine maintenance and janitorial labors are
performed throughout the production process by nonproduction employees. Maintenance and janitorial costs are allocated based on machine hours used and the number
of trees in each department, respectively. The company estimates that the cutting and pruning areas typically have about 6 and 54 trees, respectively, in them at 1 time.
The company also estimates that the cutting process requires about 9 times as many machine hours as the pruning process. The total costs of each department are as
follows:
Maintenance Department
Janitorial Department
Cutting Department.
Pruning Department
$9,000
6,000
55,000
10,000
Using the direct method of support department cost allocation, determine the total cost of each production department after allocating all support costs to the production
departments.
Feedback
Production departments total costs $
Cutting
Department
Pruning
Department
Check My Wonk
The direct method allocates all support department costs directly to production departments. The usage of the support department cost drivers by each
department must be determined. Under the direct method, any inter-support-department usages are ignored. The percentage usage of support department cost
drivers by the production departments is determined. The support department costs are allocated to the production departments by multiplying the percentage
usage of each production department by the total support department costs.
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