This problem illustrates how costs of two corporate support departments are allocated tooperating divisions using the dual-rate method. Fixed costs are allocated using budgetedcosts and budgeted hours used by other departments. Variable costs are allocated usingactual costs and actual hours used by other departments.Computer Horizons budgets the following amounts for its two central corporate support departments (legal and personnel) in supporting each other and the two manufacturing divisions, the laptop division (LTD) and the work station division (WSD): A B C D F G E OPERATING 1 SUPPORT Legal Personnel 2 Department Department LTD Total 3 BUDGETED USAGE 4 Legal (hours) 250 - 1,500 2,500 5 10% 60% 100% (Percentages) Personnel (hours) 6 2,500 22,500 50,000 7 (Percentages) 5% 45% 100% 8 9 ACTUAL USAGE 10 Legal (hours) 400 400 2,000 11 (Percentages) 20% 20% 100% 12 Personnel (hours) 26,600 40,000 2,000 5% 13 (Percentages) 66.50% 100% 14 Budgeted fixed overhead costs before any 15 interdepartment cost allocations $360,000 $475,000 - $835,000 16 Actual variable overhead costs before any 17 interdepartment cost allocations $200,000 $600,000 $800,000 Instructions What amount of support-department costs for legal and personnel will be allocated toLTD and WSD using (a) the direct method, (b) the step-down method (allocating the legaldepartment costs first), and (c) the reciprocal method using linear equations? WSD 750 30% 25,000 50% 1,200 60% 11,400 28.5%
This problem illustrates how costs of two corporate support departments are allocated tooperating divisions using the dual-rate method. Fixed costs are allocated using budgetedcosts and budgeted hours used by other departments. Variable costs are allocated usingactual costs and actual hours used by other departments.Computer Horizons budgets the following amounts for its two central corporate support departments (legal and personnel) in supporting each other and the two manufacturing divisions, the laptop division (LTD) and the work station division (WSD): A B C D F G E OPERATING 1 SUPPORT Legal Personnel 2 Department Department LTD Total 3 BUDGETED USAGE 4 Legal (hours) 250 - 1,500 2,500 5 10% 60% 100% (Percentages) Personnel (hours) 6 2,500 22,500 50,000 7 (Percentages) 5% 45% 100% 8 9 ACTUAL USAGE 10 Legal (hours) 400 400 2,000 11 (Percentages) 20% 20% 100% 12 Personnel (hours) 26,600 40,000 2,000 5% 13 (Percentages) 66.50% 100% 14 Budgeted fixed overhead costs before any 15 interdepartment cost allocations $360,000 $475,000 - $835,000 16 Actual variable overhead costs before any 17 interdepartment cost allocations $200,000 $600,000 $800,000 Instructions What amount of support-department costs for legal and personnel will be allocated toLTD and WSD using (a) the direct method, (b) the step-down method (allocating the legaldepartment costs first), and (c) the reciprocal method using linear equations? WSD 750 30% 25,000 50% 1,200 60% 11,400 28.5%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Question
Transcribed Image Text:Q4. (Horngren)
This problem illustrates how costs of two corporate support departments are
allocated tooperating divisions using the dual-rate method. Fixed costs are
allocated using budgetedcosts and budgeted hours used by other departments.
Variable costs are allocated usingactual costs and actual hours used by other
departments.Computer Horizons budgets the following amounts for its two
central corporate support departments (legal and personnel) in supporting
each other and the two manufacturing divisions, the laptop division (LTD) and
the work station division (WSD):
A
B
D
E
F
G
1
SUPPORT
OPERATING
Personnel
Legal
Department Department
2
Total
3 BUDGETED USAGE
4
Legal (hours)
-
250
2,500
5
10%
100%
(Percentages)
Personnel (hours)
6
2,500
50,000
7
(Percentages)
5%
100%
8
9 ACTUAL USAGE
10 Legal (hours)
400
2,000
11
(Percentages)
20%
100%
12 Personnel (hours)
40,000
2,000
5%
13
(Percentages)
100%
14 Budgeted fixed overhead costs before any
15 interdepartment cost allocations
$360,000
$475,000
$835,000
16 Actual variable overhead costs before any
17 interdepartment cost allocations
$200,000
$600,000
$800,000
Instructions
What amount of support-department costs for legal and personnel will be
allocated toLTD and WSD using (a) the direct method, (b) the step-down
method (allocating the legaldepartment costs first), and (c) the reciprocal
method using linear equations?
LTD
1,500
60%
22,500
45%
400
20%
26,600
66.50%
WSD
750
30%
25,000
50%
1,200
60%
11,400
28.5%
-
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