Support department cost allocation—sequential method Crystal Scarves & Co. produces winter scarves. The scarves are produced in the Cutting and Sewing departments. The Maintenance and Security departments support these production departments, and allocate costs based on machine hours and square feet, respectively. Information about each department is provided in the following table: Department Total Cost Number of Employees Machine Hours Square Feet Maintenance Department $ 2,300 6 57 800 Security Department 3,000 4 0 600 Cutting Department 19,600 20 3,700 3,200 Sewing Department 20,800 18 5,550 4,000 Using the sequential method and allocating the support department with the highest costs first, allocate all support department costs to the production departments. Then compute the total cost of each production department. CuttingDepartment SewingDepartment Production departmentsʼ total costs $ $
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.
Support department cost allocation—sequential method
Crystal Scarves & Co. produces winter scarves. The scarves are produced in the Cutting and Sewing departments. The Maintenance and Security departments support these production departments, and allocate costs based on machine hours and square feet, respectively. Information about each department is provided in the following table:
Department | Total Cost | Number of Employees | Machine Hours | Square Feet |
Maintenance Department | $ 2,300 | 6 | 57 | 800 |
Security Department | 3,000 | 4 | 0 | 600 |
Cutting Department | 19,600 | 20 | 3,700 | 3,200 |
Sewing Department | 20,800 | 18 | 5,550 | 4,000 |
Using the sequential method and allocating the support department with the highest costs first, allocate all support department costs to the production departments. Then compute the total cost of each production department.
Cutting Department |
Sewing Department |
||
Production departmentsʼ total costs | $ | $ |
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