Williams manufactures a variety of iron products, made to customer specifications, in smll batches. Willie Williams, owner, is concerned that he does not have an accurate understanding of the costs of production. You, a newly-minted MBA, have researched his business and identified various costs and cost drivers. Data Svcs Janitorial Welding HR Assembly Total Own costs $12,000 $90,000 $37,200 32,400 $54,000 $225,600 Sqaure feet 500 3,000 1,500 2,000 4,500 11,500 #employees 7 25 8 10 75 125 #transactions 30 100 180 600 140 1,050 (thou) Power usage 22 730 11 17 220 1.000 The service departments (Janitorial, HR, and Data Services) are allocated to the two production departments (Welding and Assembly). Janitorial costs are allocated using square feet, HR using number of employees, and Data Services using number of transactions. You recall that there are several approaches to the allocation of service department costs: direct, step-down and reciprocal methods. If the reclprocal method Is applled, which Is true? A. Welding's total costs after allocation are $115,840.52 B. Assembly's total costs after allocation are greater than $100,000 C. Janitorial is allocated $1.119.74 from Data Svcs D. HR's total costs after allocation are $46,059.25 E. None of the above
Williams manufactures a variety of iron products, made to customer specifications, in smll batches. Willie Williams, owner, is concerned that he does not have an accurate understanding of the costs of production. You, a newly-minted MBA, have researched his business and identified various costs and cost drivers. Data Svcs Janitorial Welding HR Assembly Total Own costs $12,000 $90,000 $37,200 32,400 $54,000 $225,600 Sqaure feet 500 3,000 1,500 2,000 4,500 11,500 #employees 7 25 8 10 75 125 #transactions 30 100 180 600 140 1,050 (thou) Power usage 22 730 11 17 220 1.000 The service departments (Janitorial, HR, and Data Services) are allocated to the two production departments (Welding and Assembly). Janitorial costs are allocated using square feet, HR using number of employees, and Data Services using number of transactions. You recall that there are several approaches to the allocation of service department costs: direct, step-down and reciprocal methods. If the reclprocal method Is applled, which Is true? A. Welding's total costs after allocation are $115,840.52 B. Assembly's total costs after allocation are greater than $100,000 C. Janitorial is allocated $1.119.74 from Data Svcs D. HR's total costs after allocation are $46,059.25 E. None of the above
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Williams manufactures a variety of iron products, made to customer specifications, in small batches. Willie
Williams, owner, is concerned that he does not have an accurate understanding of the costs of production.
You, a newly-minted MBA, have researched his business and identified various costs and cost drivers.
Janitorial Welding HR
Data
Assembly Total
Svcs
Own costs
$12,000
$90,000 $37,200 32,400 $54,000
$225,600
Sqaure feet
500
3,000
1,500
2,000
4,500
11,500
#employees 7
25
8
10
75
125
#transactions 30
100
180
600
140
1,050
(thou)
Power usage 22
730
11
17
220
1,000
The service departments (Janitorial, HR, and Data Services) are allocated to the two production
departments (Welding and Assembly). Janitorial costs are allocated using square feet, HR using number of
employees, and Data Services using number of transactions. You recall that there are several approaches to
the allocation of service department costs: direct, step-down and reciprocal methods.
If the reclprocal method Is applled, whlch Is true?
A Welding's total costs after allocation are $115,840.52
B. Assembly's total costs after allocation are greater than $100,000
C Janitorial is allocated $1.119.74 from Data Svcs
D. HR's total costs after allocation are $46,059.25
E. None of the above
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