The following information is departmental cost allocation with two service departments and two production departments. Percentage Service Provided to Department Service 1 (S1) Service 2 (S2) Production 1 (P1) Production 2 (P2) Cost $ 44,000 34,000 240,000 290,000 Service Department Cost Allocation Total Cost S1 P1 0% 20 S2 20% 0 What is the total cost in P1 and P2 and what is the amount of service department cost allocated to P1 and P2 using the step metho with S1 going first? P1 P2 40% 40% 20 60 P2

The following information is departmental cost allocation with two service departments and two production departments. Percentage Service Provided to Department Service 1 (S1) Service 2 (S2) Production 1 (P1) Production 2 (P2) Cost $ 44,000 34,000 240,000 290,000 Service Department Cost Allocation Total Cost S1 P1 0% 20 S2 20% 0 What is the total cost in P1 and P2 and what is the amount of service department cost allocated to P1 and P2 using the step metho with S1 going first? P1 P2 40% 40% 20 60 P2

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

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Step 1: Step method of allocation

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Step 2: Computation of the S1 amount allocated to S2, P1 and P2

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Step 3: computation of the S2 amount allocated to P1 and P2

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Step 4: Service Department cost allocation and total cost.

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Departmental Cost Allocation Robinson Products Company has two service departments(S1 and S2) and two production departments (P1 and P2). The distribution of each service department’s efforts (in percentages) to the other departments is:ToFrom S1 S2 P1 P2S1 — 10% 20% ?%S2 10% — ? 30The direct operating costs of the departments (including both variable and fixed costs) are:S1 $180,000S2 60,000P1 50,000P2 120,000Required1. Determine the total cost of P1 and P2 using the direct method.2. Determine the total cost of P1 and P2 using the step method.3. Determine the total cost of P1 and P2 using the reciprocal method.
A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: Budgeted Activity Activity Cost PoolBudgeted Cost Product AProduct BProduct Activity 1 7,500 10,500 21,500 Activity 2 8,500 16,500 9,500 Activity 3 4,000 2,500 3,125 How much overhead will be assigned to Product B using activity-based costing? 85,000 60,000 112,000
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(Appendix 4B) Sequential Method of Support Department Cost Allocation Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the sequential method. General Factory is allocated first in the sequential method for the company. Support department cost allocations using the sequential method are based on the following data: Support Departments Operating Divisions Overhead costs Machine hours Square footage Direct labor hours Required: Power Allocation ratios for General Factory Battery Power Small Motors $160,000 Allocation ratios for Power 2,000 1,000 General Factory $430,000 1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places.) 2,000 1,500 Battery $163,000 7,000 7,500 18,000 Small Motors $84,600 1,500 20,000 60,000
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Explain departmental income statement and the criterion for division of indirect costs among departments. Provide a hypothetical example in which at least 3 indirect costs are divided among departments.
The following is a partially completed departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for its four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Maintenance department expense to be allocated to Fabrication. Operating costs No. of purchase orders Sq. ft. of space Multiple Choice O $6,400. $9,900. $8,100. $9,000. $25,600. Purchasing Maintenance Fabrication Assembly $32,000 $18,000 $96,000 16 3,300 $62,000 4 2,700
Assume a company provided the following information: Departmental costs Number of employees Square feet of space occupied Multiple Choice If the company (1) uses the direct method to allocate service department costs to operating departments, (2) allocates Cafeteria costs based on the number of employees, and (3) allocates Janitorial costs based on square feet of space of occupied, then the cost allocated from the Cafeteria Department to the Lab Department is closest to: C $58,338. $63,467. $76,800. Service Departments Operating Departments Cafeteria Janitorial Lab Tech $232,000 $950,000 32 68 $240,000 $140,000 20 2,000 11,000 9,000 $116,800. 10 3,000
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Part 1: Allocate the costs of the 3 service departments using the direct method. Part 2: Allocate the costs of the 3 service departments using the step method, with the order determined by the greater percentage usage. Part 3: Allocate the costs of the 3 service departments using the reciprical method. Part 4:What is one strength and one drawback of each of the methods?