MalntenanceSecurityMiningCuttingDepartmentDepartmentDepartmentDepartmentMaintenance cost allocationSecurity cost allocationProduction activities total costs$43. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated fromeach support activity to the other activities.MIningCuttingParticularsDepartmentDepartmentMaintenance cost2$Security cost2$$4Production activities total cost%24$4Is 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 allocationJake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These productionactivities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenancecosts are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Informationregarding the activities is provided in the following table:MalntenanceSecurityMiningCuttingNumber of service calls17206020Machine hours8988182176Asset value$200,000$80,000$300,000$300,000Department cost$25,000$42,500$160,0001. Is the process of allocating maintenance costs based on machine hours correct? Identify the measure than can possibly be used to allocate the$95,000maintenance costs.Measures that can possibly be used to allocate the maintenance costs.a. Number of service callsb. Asset valuec. Department costd. None of the above2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal servicesmethod and the most appropriate cost driver for Maintenance.

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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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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