1. Explanation Direct Method: The direct method is a method of allocating the costs in which the cost of a support department is individually alloted to the operating departments. In this method the costs of one support department is not alloted to the other support department. Allocation of the costs as per the direct method is, Support department cost allocation statement Particulars Support Operating HR IS Corporate Sales Consumer sales Budgeted overhead costs $72,700 $234,400 Allocation of HR ($72,700) $43,620 $29,080 Allocation of IS ($234,400) $127,855 $106,545 Total allocated costs - - $171,475 $135,625 Table (1) Working Note: Allocation of HR is, 2. To determine The ranking of support departments on the basis of the percentage of their services provided to other departments and with this ranking allocate costs to the support departments using the step-down method. 3. To determine The way in which the support departments can be ranked differently.

15th Edition

ISBN: 9780133812763

Author: Rajan

Publisher: VST

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Question

Chapter 15, Problem 15.21E

To determine

The allocation of costs of support departments to the operating departments using the direct method for September 2013.

To determine

The ranking of support departments on the basis of the percentage of their services provided to other departments and with this ranking allocate costs to the support departments using the step-down method.

To determine

The way in which the support departments can be ranked differently.

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Chapter 15 Solutions

EBK COST ACCOUNTING

Ch. 15 - Prob. 15.1Q Ch. 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. 15.7Q Ch. 15 - What is conceptually the most defensible method...Ch. 15 - Distinguish between two methods of allocating...Ch. 15 - Prob. 15.10Q

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