COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Chapter 15, Problem 15.36P
Support-department cost allocations; direct, step-down, and reciprocal methods. Ballantine Corporation has two operating departments: Eastern Department and Western Department. Each of the operating departments uses the services of the company’s two support departments: Engineering and Information Technology. Additionally, the Engineering and Information Technology departments use the services of each other. Data concerning the past year are as follows:
- 1. What are the total
overhead costs of the operating departments (Eastern and Western) after the support-department costs of Engineering and Information Technology have been allocated using (a) the direct method, (b) the step-down method (allocate Engineering first), (c) the step-down method (allocate Information Technology first), and (d) the reciprocal method?Required
- 2. Which method would you recommend that Ballantine Corporation use to allocate service-department costs? Why?
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Which method would you recommend that Ballantine Corporation use to allocate service-department costs? Why?
Comparison of Methods of Allocation
Duweynie Pottery, Inc., is divided into two operating divisions: Pottery and Retail. The company allocates Power and General Factory
department costs to each operating division. Power costs are allocated on the basis of the number of machine hours and general factory
costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated.
Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations.
Support Departments
Operating Divisions
Pottery
Retail
Power
$140,400
Overhead costs
$99,000
$57,000
Machine hours
2,000
7,000
3,000
Square footage
2,500
4,000
6,000
Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar.
Required:
1. Allocate the support service costs using the direct method.
Note: Input to two decimal places.
Allocation Ratios
Proportion of machine hours
Proportion of…
Comparison of Methods of Allocation
Duweynie Pottery, Inc., is divided into two operating divisions: Pottery and Retail. The company allocates Power and General Factory department costs to each operating division. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations.
Support Departments
Operating Divisions
Power
General Factory
Pottery
Retail
Overhead costs
$159,600
$181,200
$97,000
$55,000
Machine hours
2,000
2,500
7,000
3,000
Square footage
2,500
1,700
4,000
6,000
Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar.
Required:
3. Allocate the support service costs using the reciprocal method.
Note: If…
Chapter 15 Solutions
COST ACCOUNTING
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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