Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 5, Problem 8E
To determine
Allocate the support department costs with highest departments cost first.
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AI Rawabi company consist of two support departments (Administration and R& D) and two operating departments
(Manufacturing & Assembling). The cost of Administration department is allocated based on number of employees and the cost
of R& D department is allocated based on research hours. The table below shows the cost details. Allocate the cost of the
support departments to the operating departments using direct step-dowrtHow much is the Assembling department total cost
after cost allocation:
Support Departments
Operating Departments
Admin
R&D Manufacturing Assembling Total Cost
Cost:
Salaries
30000
60000
44000
70000
204000
Supplies
10000
30000
25000
30000
95000
Total
40000
90000
69000
100000
299000
Allocation Base:
Research Hours
200
300
450
250
Number of Employees
7
10
9.
13
Select one:
O a. RO 155775
O b. 162090.3
O c. RO 143225
O d. RO 136909.7
Compute the total overhead costs of the operating departments (Retail Shops and Online Shop) after the service department costs of Admin and HR have been allocated using
the direct method
the step-down (using the sequence of cost of service provided)
the reciprocal method
(b)Which method would you recommend that the company use to allocate service department costs? Why? You should consider different perspectives.
Allocate the support departments’ costs to the operating departments using the direct method
Chapter 5 Solutions
Managerial Accounting
Ch. 5 - Why are support department costs difficult to...Ch. 5 - Why does support department cost allocation matter...Ch. 5 - What are some drawbacks of applying support...Ch. 5 - Why is the diect method of support department cost...Ch. 5 - How does management determine the order in which...Ch. 5 - Are large or small companies more likely to use...Ch. 5 - What is the main difference between the physical...Ch. 5 - When would management most likely use the net...Ch. 5 - What are the two most often used ways of...Ch. 5 - How can support department and joint cost...
Ch. 5 - Charlies Wood Works produces wood products (e.g.,...Ch. 5 - Bucknum Boys, Inc., produces hunting gear for buck...Ch. 5 - Prob. 3BECh. 5 - Blakes Blacksmith Co. produces two types of...Ch. 5 - Garys Grooves Co. produces two types of carving...Ch. 5 - Prob. 6BECh. 5 - Yo-Down Inc. produces yogurt. Information related...Ch. 5 - Prob. 2ECh. 5 - Blue Africa Inc. produces laptops and desktop...Ch. 5 - Christmas Timber, Inc., produces Christmas trees....Ch. 5 - Crystal Scarves Co. produces winter scarves. The...Ch. 5 - Davis Snowflake Co. produces Christmas stockings...Ch. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Support department cost allocation comparison...Ch. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Joint cost allocation market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Joint cost allocation-market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Support department cost allocation Blue Mountain...Ch. 5 - Support activity cost allocation Jakes Gems mines...Ch. 5 - Joint cost allocation Lovely Lotion Inc. produces...Ch. 5 - Joint cost allocation Florissas Flowers jointly...Ch. 5 - Support department cost allocation Hooligan...Ch. 5 - Support activity cost allocation Kizzles Crepes...Ch. 5 - Joint cost allocation McKenzies Soap Sensations,...Ch. 5 - Prob. 4PBCh. 5 - Analyze Milkrageous, Inc. Milkragcous, Inc., a...Ch. 5 - Analyze Horsepower Hookup, Inc. Horsepower Hookup,...Ch. 5 - Prob. 3MADCh. 5 - Prob. 4MADCh. 5 - Joint cost allocation and performance evaluation...Ch. 5 - Prob. 3TIFCh. 5 - Prob. 1CMACh. 5 - Adam Corporation manufactures computer tables and...Ch. 5 - Breegle Company produces three products (B-40,...Ch. 5 - Tucariz Company processes Duo into two joint...
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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: 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?arrow_forwardVirgin River 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. Support Department 1 Department 2 Support Production Production Department 1 Department 2 Number of employees 9. 7 25 18 Asset value $1,150 $670 $6,230 $5,100 Department cost $20,000 $15,500 $99,000 $79,000arrow_forwardTrek, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly). The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows. Human Resources Building Maintenance. Machining Assembly Assuming use of the direct method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)? Multiple Choice O 18,000. 66,000. 48,000. 7,000 11,000 20,000 28,000 More information is needed to judge. 55,000.arrow_forward
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- help mearrow_forwardweat ubject - accountingarrow_forwardFor each of the following activities, select the most appropriate cost driver. Each cost driver may be used only once. Activity Cost Driver 1. Pay vendors Answer 2. Evaluate vendors Answer 3. Inspect raw materials Answer 4. Plan for purchases of raw materials Answer 5. Packaging Answer 6. Supervision Answer 7. Employee training Answer 8. Clean tables Answer 9. Machine maintenance Answer 10. Move in-process product from one work station to the next Answerarrow_forward
- The Woodridge Manufacturing Company has two Production Departments: Cutting and Pasting. Each of these two departments uses the services provided by the Computing and Maintenance Departments, which both support the production functions and each other’s functions as well. Woodridge uses the step method of allocating these service department costs to the production departments. Computing is allocated on the basis of hours of department operations and Maintenance is allocated on the basis of departmental direct labor hours. Last period the following costs were recorded: Cutting Department overhead $400,000 Pasting Department overhead $600,000 Computing Department total costs $700,000 Maintenance Department total costs $300,000 Production Department data: Cutting Pasting Computing Maintenance Hours of operation 5,000 7,500 15,000 2,500 Direct labor hours recorded 4,000 8,000 4,000 8,000 Required: a. Determine the…arrow_forwardAssume that a company has recently switched to JIT manufacturing. Each manufacturing cell produces a single product or major subassembly. Cell workers have been trained to perform a variety of tasks. Additionally, many services have been decentralized. Costs are assigned to products using direct tracing, driver tracing, and allocation. For each cost listed, indicate the most likely product cost assignment method used before JIT and after JIT. Set up a table with three columns: Cost Item, Before JIT, and After JIT. You may assume that direct tracing is used whenever possible, followed by driver tracing, with allocation being the method of last resort. Inspection costs Power to heat, light, and cool plant Minor repairs on production equipment Salary of production supervisor (department/cell) Oil to lubricate machinery Salary of plant supervisor Costs to set up machinery Salaries of janitors Power to operate production equipment Taxes on plant and equipment Depreciation on production…arrow_forwardIdentifying Cost Drivers. Palisades Company identified the activities listed in the following as being most important (step 1 and step 2 of activity-based costing), and it formed cost pools for each activity: 1. Purchasing raw materials 2. Inspecting raw materials 3. Storing raw materials 4. Maintaining production equipment 5. Setting up machines to produce batches of product 6. Testing finished products Required: Perform step 3 of the activity-based costing process by identifying a possible cost driver for each activity.arrow_forward
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What is Cost Allocation? Definition & Process; Author: FloQast;https://www.youtube.com/watch?v=hLhvvHvZ3JM;License: Standard Youtube License