Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 5, Problem 1PB
Support department cost allocation
Hooligan Adventure Supply produces and sells various outdoor equipment. The Molding and Assembly production departments are supported by the Personnel and Maintenance departments. Personnel costs are allocated to the production departments based on the number of employees, and Maintenance costs are allocated based on number of service calls. Information about these departments is detailed in the following table:
Instructions
- 1. Assuming that Hooligan Adventure Supply uses the sequential method to allocate its support department costs, which support department does it most likely allocate first?
- 2. Based on your response in part (1), determine the total costs allocated from each support department to each production department using the sequential method.
- 3. If Hooligan Adventure Supply wanted to use a more accurate support department cost allocation method, which method should it choose? What might discourage the company from using this method?
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Support department cost allocation
Hooligan Adventure Supply produces and sells various outdoor equipment. The Molding and Assembly production departments are supported by the Personnel and Maintenance departments. Personnel costs are allocated to the production departments based on the number of employees, and Maintenance costs are allocated based on number of service calls. Information about these departments is detailed in the following table:
Line Item Description
PersonnelDepartment
MaintenanceDepartment
MoldingDepartment
AssemblyDepartment
Number of employees
28
10
41
49
Number of service calls
57
41
168
112
Department cost
$15,000
$11,400
$72,000
$69,000
1. Which of the following statements matches the sequential method of cost allocations?a. Support departments are often allocated in order from lowest to the highest cost with preference given to the departments that serve few support…
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Snowy River Stallion Inc. produces horse and rancher equipment. Costs from Support Department 1 are allocated based on the number of employees. Costs from Support Department 2 are allocated based on asset value. Relevant department information is provided in the following table:
Using the sequential method of support department cost allocation, determine the total costs from Support Department 1 (assuming they are allocated first) that should be allocated to Support Department 2 and to each of the production departments.
Chapter 5 Solutions
Managerial Accounting
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What is Cost Allocation? Definition & Process; Author: FloQast;https://www.youtube.com/watch?v=hLhvvHvZ3JM;License: Standard Youtube License