Concept explainers
a.
Calculate the allocation of cost based on the step method starting from maintenance.
a.

Answer to Problem 30E
The total cost allocation is $40,000 and $32,000 for machining and assembly, and there is no cost allocation in maintenance and cafeteria.
Explanation of Solution
Step method:
Step method allows the allocation of the cost to the production department and service departments. Unlike the direct method, it also allocates the cost of the service to various service departments. Allocation of the cost starts from the department that has provided the highest proposition of service to the department that has provided the least service. Step method allows only one-way allocation of cost among service departments.
Calculate the cost allocation based on the step method:
Particular | Maintenance | Cafeteria | Machining | Assembly |
Service department cost | $40,000 | $32,000 | ||
Maintenance | $ (40,000) | $8,000 (1) | $20,000 (1) | $12,000 (1) |
Cafeteria | $(40,000)(4) | $20,000(2) | $20,000(3) | |
Total cost allocation | $0 | $0 | $40,000 | $32,000 |
Table: (1)
Thus, the total cost allocation is $40,000 and $32,000 for machining and assembly, and there is no cost allocation in maintenance and cafeteria.
Working note 1:
Calculate the maintenance cost allocation:
Particulars |
Proposition (a) |
Total costs (b) |
Cost allocation |
Cafeteria | 20% | $40,000 | $8,000 |
Machining | 50% | $40,000 | $20,000 |
Assembly | 30% | $40,000 | $12,000 |
Table: (1)
Working note 2:
Calculate the cafeteria cost for the machining department:
Working note 3:
Calculate the cafeteria cost for the assembly department:
Working note 4:
Calculate the cafeteria cost for the assembly department:
b.
Calculate the allocation of cost based on the step method starting from the cafeteria.
b.

Answer to Problem 30E
The total cost allocation is $44,200 and $27,800 for machining and assembly, and there is no cost allocation in maintenance and cafeteria.
Explanation of Solution
Cost allocation:
Cost allocation refers to the process of distributing the common cost of the production and service rendered to the various departments of the business. It is used to calculate the actual cost attributed to a specific department.
Calculate the cost allocation based on the step method:
Particular | Maintenance | Cafeteria | Machining | Assembly |
Service department cost | $32,000 | $40,000 | ||
Maintenance | $ (32,000) | $25,600(4) | $3,200(4) | $3,200(4) |
Cafeteria | $(65,600)(7) | $41,000(5) | $24,600(6) | |
Total cost allocation | $0 | $0 | $44,200 | $27,800 |
Table: (2)
Thus, the total cost allocation is $44,200 and $27,800 for machining and assembly, and there is no cost allocation in maintenance and cafeteria.
Working note 4:
Calculate the cafeteria cost allocation:
Particulars |
Proposition (a) |
Total costs (b) |
Cost allocation |
Cafeteria | 80% | $32,000 | $25,600 |
Machining | 10% | $32,000 | $3,200 |
Assembly | 10% | $32,000 | $3,200 |
Table: (3)
Working note 5:
Calculate the maintenance cost for the machining department:
Working note 6:
Calculate the maintenance cost for the assembly department:
Working note 7:
Calculate the maintenance cost for the assembly department:
Want to see more full solutions like this?
Chapter 11 Solutions
FUNDAMENTALS OF COST ACCOUNTING
- Bluesy Electronics recorded the following financial data: Net Sales $720,500 Average Inventory at Cost = $80,200 Gross Margin Percentage = 42% Calculate the GMROI.arrow_forwardNeed help this question solutionarrow_forwardXYZ Company has a gross profit margin of 0.30, an operating profit margin of 18%, a total asset turnover ratio of 2.0x, and cost of goods sold of $700,000. The company's tax rate is 35%, and it has no debt. Calculate XYZ Company's Return on Assets (ROA).arrow_forward
- MON Pools builds custom swimming pools. MON budgets that they will build 16 pools during the month of June at a price of $22,750 per pool. The actual pools built by MON during June were 13 pools at a price of $23,420 per pool. What is the Flexible Budget Variance for June?arrow_forwardAnderson Corp. pays its employees every Friday for work performed through that Friday. Anderson employees work Monday through Friday and do not work on weekends. The gross payroll for Anderson is $12,500 each week. Anderson will pay its employees $12,500 on Friday, May 8th. This payroll is for wages earned Monday, May 4th through Friday, May 8th. How much of the $12,500 paid on May 8th should be expensed in May?arrow_forwardPlease solve this problem general accounting question don't use ai solutionarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





