15th Edition

ISBN: 9781337902663

Author: WARREN, Carl S.

Publisher: Cengage Learning,

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In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyz…

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Chapter 19, Problem 1PA

Support department cost allocation

Blue Mountain Masterpieces produces pictures, paintings, and other home decor. The Printing and Framing production departments are supported by the Janitorial and Security departments. Janitorial costs are allocated to the production departments based on square feet, and security costs are allocated based on asset value. Information about these departments is detailed in the following table:

Chapter 19, Problem 1PA, Support department cost allocation Blue Mountain Masterpieces produces pictures, paintings, and

Management has experimented with different support department cost allocation methods in the past. The different allocation methods did not yield large differences of cost allocation to the production departments.

Instructions

1. Determine which support department cost allocation method Blue Mountain Masterpieces would most likely use to allocate its support department costs to the production departments.
2. Determine the total costs allocated from each support department to each production department using the method you determined in part (1).
3. Without doing calculations, consider and answer the following: If Blue Mountain Masterpieces decided to use square feet instead of asset value as the cost driver for security services, how would this change the allocation of Security Department costs?

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Chapter 19, Problem 18E

Chapter 19, Problem 2PA

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What are the total costs of the production departments (clothing and shoes) after the support department costs of information technology and human resources have been allocated using (a) the direct method, (b) the step-down method (allocate information technology first), (c) the step-down method (allocate human resources first), and (d) the reciprocal method? Assume that all of the work of the IT department could be outsourced to an independent company for $97.50 per hour. If Sportz no longer operated its own IT department, 30% of the fixed costs of the IT department could be eliminated. Should Sportz outsource its IT services?

Chapter 19 Solutions

Financial And Managerial Accounting

Ch. 19 - Why are support department costs difficult to...Ch. 19 - Why does support department cost allocation matter...Ch. 19 - What are some drawbacks of applying support...Ch. 19 - Why is the diect method of support department cost...Ch. 19 - How does management determine the order in which...Ch. 19 - Are large or small companies more likely to use...Ch. 19 - What is the main difference between the physical...Ch. 19 - When would management most likely use the net...Ch. 19 - What are the two most often used ways of...Ch. 19 - How can support department and joint cost...

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