Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
16th Edition
ISBN: 9780134642468
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 15, Problem 15.16E
Single-rate versus dual-rate methods, support department. The Cincinnati power plant that services all manufacturing departments of Eastern Mountain Engineering has a budget for the coming year. This budget has been expressed in the following monthly terms:
| Manufacturing Department | Needed at Practical Capacity Production Level (Kilowatt-Hours) | Average Expected Monthly Usage (Kilowatt-Hours) |
| Loretta | 13,000 | 10,000 |
| Bently | 21,000 | 9,000 |
| Melboum | 14,000 | 10,000 |
| Eastmoreland | 32,000 | 11,000 |
| Total | 80,000 | 40,000 |
The expected monthly costs for operating the power plant during the budget year are $20,000: $8,000 variable and $12,000 fixed.
- 1. Assume that a single cost pool is used for the power plant costs. What budgeted amounts will be allocated to each manufacturing department if (a) the rate is calculated based on practical capacity and costs are allocated based on practical capacity and (b) the rate is calculated based on expected monthly usage and costs are allocated based on expected monthly usage?
- 2. Assume the dual-rate method is used with separate cost pools for the variable and fixed costs. Variable costs are allocated on the basis of expected monthly usage. Fixed costs are allocated on the basis of practical capacity. What budgeted amounts will be allocated to each manufacturing department? Why might you prefer the dual-rate method?
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Single-rate versus dual-rate methods, support department. The Cincinnati power plant that services all manufacturing departments of Eastern Mountain Engineering has a budget for the coming year. This budget has been expressed in the following monthly terms:
The Chicago power plant that services all manufacturing departments of MidWestEngineering has a budget for the coming year. This budget has been expressed in thefollowing monthly terms:Manufacturing Needed at Practical Capacity Average Expected MonthlyDepartment Production Level (Kilowatt- Usage (Kilowatt-Hours)Rockford 10,000 8,000Peoria 20,000 9,000Hammond 12,000 7,000Kankakee 8,000 6,000Total 50,000 30,000The expected monthly costs for operating the power plant during the budget year are $15,000:$6,000 variable and $9,000 fixed.Required:1. Assume that a single cost pool is…
Question 1 (Single-rate versus dual-rate methods for allocating support department costs)The Cincinnati power plant that services all manufacturing departments of Eastern MountainEngineering has a budget for the coming year. This budget has been expressed in the following monthlyterms:ManufacturingDepartmentNeeded at Practical CapacityProduction Level (KilowattHoursAverage Expected MonthlyUsage (Kilowatt-Hours)Loretta 13,000 10,000Bently 21,000 9,000Melboum 14,000 10,000Eastmoreland 32,000 11,000Total 80,000 40,000The expected monthly costs for operating the power plant during the budget year are $20,000: $8,000variable and $12,000 fixed.Required:1. Assume that a single cost pool is used for the power plant costs. What budgeted amounts will beallocated to each manufacturing department if:(a) the rate is calculated based on practical capacity and costs are allocated based on practicalcapacity and(b) the rate is calculated based on expected monthly usage and costs are allocated based…
Chapter 15 Solutions
Horngren's Cost Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (16th Edition)
Ch. 15 - Prob. 15.1QCh. 15 - Describe how the dual-rate method is useful to...Ch. 15 - How do budgeted cost rates motivate the...Ch. 15 - Give examples of allocation bases used to allocate...Ch. 15 - Why might a manager prefer that budgeted rather...Ch. 15 - To ensure unbiased cost allocations, fixed costs...Ch. 15 - Prob. 15.7QCh. 15 - What is conceptually the most defensible method...Ch. 15 - Distinguish between two methods of allocating...Ch. 15 - What are the challenges of using the incremental...
Ch. 15 - Prob. 15.11QCh. 15 - What is one key way to reduce cost-allocation...Ch. 15 - Describe how companies are increasingly facing...Ch. 15 - Distinguish between the stand-alone and the...Ch. 15 - Identify and discuss arguments that individual...Ch. 15 - Single-rate versus dual-rate methods, support...Ch. 15 - Single-rate method, budgeted versus actual costs...Ch. 15 - Dual-rate method, budgeted versus actual costs and...Ch. 15 - Support-department cost allocation; direct and...Ch. 15 - Support-department cost allocation, reciprocal...Ch. 15 - Direct and step-down allocation. E-books, an...Ch. 15 - Reciprocal cost allocation (continuation of...Ch. 15 - Allocation of common costs. Evan and Brett are...Ch. 15 - Allocation of common costs. Gordon Grimes, a...Ch. 15 - Revenue allocation, bundled products. Couture Corp...Ch. 15 - Allocation of common costs. Jim Dandy Auto Sales...Ch. 15 - Single-rate, dual-rate, and practical capacity...Ch. 15 - Prob. 15.28PCh. 15 - Fixed-cost allocation. Central University...Ch. 15 - Allocating costs of support departments; step-down...Ch. 15 - Support-department cost allocations;...Ch. 15 - Common costs. Tate Inc. and Booth Inc. are two...Ch. 15 - Prob. 15.33PCh. 15 - Support-department cost allocations;...Ch. 15 - Revenue allocation, bundled products. Boca Resorts...Ch. 15 - Support-department cost allocations; direct,...
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