Department Department Department Department Maintenance cost allocation $4 Security cost allocation Production activities total costs 3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation m each support activity to the other activities. Mining Cutting Department Department Particulars Maintenance cost $4 Security cost Production activities total cost s it viable for the company to choose the direct method of cost allocation?
Department Department Department Department Maintenance cost allocation $4 Security cost allocation Production activities total costs 3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation m each support activity to the other activities. Mining Cutting Department Department Particulars Maintenance cost $4 Security cost Production activities total cost s it viable for the company to choose the direct method of cost allocation?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter5: Support Department And Joint Cost Allocation
Section: Chapter Questions
Problem 2PA: Support activity cost allocation Jakes Gems mines and produces diamonds, rubies, and other gems. The...
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Question
![Malntenance
Security
Mining
Cutting
Department
Department
Department
Department
Maintenance cost allocation
Security cost allocation
Production activities total costs
$4
3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated from
each support activity to the other activities.
MIning
Cutting
Particulars
Department
Department
Maintenance cost
2$
Security cost
2$
$4
Production activities total cost
%24
$4
Is it viable for the company to choose the direct method of cost allocation?
Which of the following supports your answer?
a. The direct cost allocation method is too simple and it is not accurate.
b. The difference between the direct cost allocation method and the reciprocal method is minimal and the direct method is easier.
c. The reciprocal method of cost allocation is more accurate and easier than the direct method.
d. None of the above.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff4fb7d36-b9f5-4fe8-abdc-1ecc785150c7%2F46819ce4-4118-4218-a3af-ba6a2f98c21b%2Fczu9t9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Malntenance
Security
Mining
Cutting
Department
Department
Department
Department
Maintenance cost allocation
Security cost allocation
Production activities total costs
$4
3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated from
each support activity to the other activities.
MIning
Cutting
Particulars
Department
Department
Maintenance cost
2$
Security cost
2$
$4
Production activities total cost
%24
$4
Is it viable for the company to choose the direct method of cost allocation?
Which of the following supports your answer?
a. The direct cost allocation method is too simple and it is not accurate.
b. The difference between the direct cost allocation method and the reciprocal method is minimal and the direct method is easier.
c. The reciprocal method of cost allocation is more accurate and easier than the direct method.
d. None of the above.
![Support activity cost allocation
Jake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production
activities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenance
costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information
regarding the activities is provided in the following table:
Malntenance
Security
Mining
Cutting
Number of service calls
17
20
60
20
Machine hours
89
88
182
176
Asset value
$200,000
$80,000
$300,000
$300,000
Department cost
$25,000
$42,500
$160,000
1. Is the process of allocating maintenance costs based on machine hours correct? Identify the measure than can possibly be used to allocate the
$95,000
maintenance costs.
Measures that can possibly be used to allocate the maintenance costs.
a. Number of service calls
b. Asset value
c. Department cost
d. None of the above
2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services
method and the most appropriate cost driver for Maintenance.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff4fb7d36-b9f5-4fe8-abdc-1ecc785150c7%2F46819ce4-4118-4218-a3af-ba6a2f98c21b%2Fn5gg7p_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Support activity cost allocation
Jake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production
activities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenance
costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information
regarding the activities is provided in the following table:
Malntenance
Security
Mining
Cutting
Number of service calls
17
20
60
20
Machine hours
89
88
182
176
Asset value
$200,000
$80,000
$300,000
$300,000
Department cost
$25,000
$42,500
$160,000
1. Is the process of allocating maintenance costs based on machine hours correct? Identify the measure than can possibly be used to allocate the
$95,000
maintenance costs.
Measures that can possibly be used to allocate the maintenance costs.
a. Number of service calls
b. Asset value
c. Department cost
d. None of the above
2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services
method and the most appropriate cost driver for Maintenance.
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