Ascertain the cost allocated using each method of allocation.

Question

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Answer 1

Question

Chapter 7, Problem 39P

1.

To determine

Ascertain the cost allocated using each method of allocation.

1.

Expert Solution

Explanation of Solution

a) Direct method:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (1)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($80,000)	$40,000	$10,000	$30,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($40,000)	$17,776	$11,112	$11,112

Particulars	Programming	Consult	Training
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$57,776	$21,112	$41,112

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$217,776	$211,112	$166,112

Table (2)

b.1) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (3)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	20%	40%	10%	30%
Allocation amount ($80,000)	$16,000	$32,000	$8,000	$24,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($56,000)	$24,886	$15,557	$15,557

Particulars	Programming	Consult	Training
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$56,886	$23,557	$39,557

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$216,886	$213,557	$164,557

Table (4)

b.2) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (5)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	10%	40%	25%	25%
Allocation amount ($40,000)	$4,000	$16,000	$10,000	$10,000

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($84,000)	$42,000	$10,500	$31,500

Particulars	Programming	Consult	Training
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$58,000	$20,500	$41,500

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$218,000	$210,500	$166,500

Table (6)

c) Reciprocal method

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (7)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Allocation percentage	40%	10%	30%
Allocation amount ($85,714.29)	$34,286	$8,571	$25,714

Facilities
Particulars	Programming	Consult	Training
Allocation percentage	40%	25%	25%
Allocation amount ($57,142.86)	$22,857	$14,286	$14,286

Particulars	Programming	Consult	Training
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$57,143	$22,857	$40,000

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$217,143	$212,857	$165,000

Table (8)

Compute the base for allocation:

Reciprocal Cost allocation Using Solver
Particulars	Allocated costs	Service rates to		Allocation to
Particulars	Allocated costs	Info systems	Facilities	Info systems	Facilities
Info systems	$85,714.29	1.00	(0.20)	$85,714	($17,143)
Facilities	$57,142.86	(0.10)	1.00	($5,714)	$57,143
Total				$80,000	$40,000

Table (9)

2.

To determine

Ascertain the impact of the proposed plan and its overall impact.

2.

Expert Solution

Explanation of Solution

A new allocation base based on the floor space occupied, machine hours may provide a more similar value like the outside market cost. In such a case the market prices shall force a more competitive service department costs similar to the service costs of the outside suppliers.

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Answer 2

Question

Chapter 7, Problem 39P

1.

To determine

Ascertain the cost allocated using each method of allocation.

1.

Expert Solution

Explanation of Solution

a) Direct method:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (1)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($80,000)	$40,000	$10,000	$30,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($40,000)	$17,776	$11,112	$11,112

Particulars	Programming	Consult	Training
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$57,776	$21,112	$41,112

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$217,776	$211,112	$166,112

Table (2)

b.1) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (3)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	20%	40%	10%	30%
Allocation amount ($80,000)	$16,000	$32,000	$8,000	$24,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($56,000)	$24,886	$15,557	$15,557

Particulars	Programming	Consult	Training
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$56,886	$23,557	$39,557

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$216,886	$213,557	$164,557

Table (4)

b.2) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (5)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	10%	40%	25%	25%
Allocation amount ($40,000)	$4,000	$16,000	$10,000	$10,000

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($84,000)	$42,000	$10,500	$31,500

Particulars	Programming	Consult	Training
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$58,000	$20,500	$41,500

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$218,000	$210,500	$166,500

Table (6)

c) Reciprocal method

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (7)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Allocation percentage	40%	10%	30%
Allocation amount ($85,714.29)	$34,286	$8,571	$25,714

Facilities
Particulars	Programming	Consult	Training
Allocation percentage	40%	25%	25%
Allocation amount ($57,142.86)	$22,857	$14,286	$14,286

Particulars	Programming	Consult	Training
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$57,143	$22,857	$40,000

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$217,143	$212,857	$165,000

Table (8)

Compute the base for allocation:

Reciprocal Cost allocation Using Solver
Particulars	Allocated costs	Service rates to		Allocation to
Particulars	Allocated costs	Info systems	Facilities	Info systems	Facilities
Info systems	$85,714.29	1.00	(0.20)	$85,714	($17,143)
Facilities	$57,142.86	(0.10)	1.00	($5,714)	$57,143
Total				$80,000	$40,000

Table (9)

2.

To determine

Ascertain the impact of the proposed plan and its overall impact.

2.

Expert Solution

Explanation of Solution

A new allocation base based on the floor space occupied, machine hours may provide a more similar value like the outside market cost. In such a case the market prices shall force a more competitive service department costs similar to the service costs of the outside suppliers.

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Answer 3

Question

Chapter 7, Problem 39P

1.

To determine

Ascertain the cost allocated using each method of allocation.

1.

Expert Solution

Explanation of Solution

a) Direct method:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (1)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($80,000)	$40,000	$10,000	$30,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($40,000)	$17,776	$11,112	$11,112

Particulars	Programming	Consult	Training
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$57,776	$21,112	$41,112

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$217,776	$211,112	$166,112

Table (2)

b.1) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (3)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	20%	40%	10%	30%
Allocation amount ($80,000)	$16,000	$32,000	$8,000	$24,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($56,000)	$24,886	$15,557	$15,557

Particulars	Programming	Consult	Training
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$56,886	$23,557	$39,557

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$216,886	$213,557	$164,557

Table (4)

b.2) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (5)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	10%	40%	25%	25%
Allocation amount ($40,000)	$4,000	$16,000	$10,000	$10,000

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($84,000)	$42,000	$10,500	$31,500

Particulars	Programming	Consult	Training
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$58,000	$20,500	$41,500

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$218,000	$210,500	$166,500

Table (6)

c) Reciprocal method

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (7)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Allocation percentage	40%	10%	30%
Allocation amount ($85,714.29)	$34,286	$8,571	$25,714

Facilities
Particulars	Programming	Consult	Training
Allocation percentage	40%	25%	25%
Allocation amount ($57,142.86)	$22,857	$14,286	$14,286

Particulars	Programming	Consult	Training
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$57,143	$22,857	$40,000

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$217,143	$212,857	$165,000

Table (8)

Compute the base for allocation:

Reciprocal Cost allocation Using Solver
Particulars	Allocated costs	Service rates to		Allocation to
Particulars	Allocated costs	Info systems	Facilities	Info systems	Facilities
Info systems	$85,714.29	1.00	(0.20)	$85,714	($17,143)
Facilities	$57,142.86	(0.10)	1.00	($5,714)	$57,143
Total				$80,000	$40,000

Table (9)

2.

To determine

Ascertain the impact of the proposed plan and its overall impact.

2.

Expert Solution

Explanation of Solution

A new allocation base based on the floor space occupied, machine hours may provide a more similar value like the outside market cost. In such a case the market prices shall force a more competitive service department costs similar to the service costs of the outside suppliers.

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Answer 4

Question

Chapter 7, Problem 39P

1.

To determine

Ascertain the cost allocated using each method of allocation.

1.

Expert Solution

Explanation of Solution

a) Direct method:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (1)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($80,000)	$40,000	$10,000	$30,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($40,000)	$17,776	$11,112	$11,112

Particulars	Programming	Consult	Training
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$57,776	$21,112	$41,112

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$217,776	$211,112	$166,112

Table (2)

b.1) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (3)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	20%	40%	10%	30%
Allocation amount ($80,000)	$16,000	$32,000	$8,000	$24,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($56,000)	$24,886	$15,557	$15,557

Particulars	Programming	Consult	Training
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$56,886	$23,557	$39,557

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$216,886	$213,557	$164,557

Table (4)

b.2) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (5)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	10%	40%	25%	25%
Allocation amount ($40,000)	$4,000	$16,000	$10,000	$10,000

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($84,000)	$42,000	$10,500	$31,500

Particulars	Programming	Consult	Training
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$58,000	$20,500	$41,500

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$218,000	$210,500	$166,500

Table (6)

c) Reciprocal method

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (7)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Allocation percentage	40%	10%	30%
Allocation amount ($85,714.29)	$34,286	$8,571	$25,714

Facilities
Particulars	Programming	Consult	Training
Allocation percentage	40%	25%	25%
Allocation amount ($57,142.86)	$22,857	$14,286	$14,286

Particulars	Programming	Consult	Training
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$57,143	$22,857	$40,000

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$217,143	$212,857	$165,000

Table (8)

Compute the base for allocation:

Reciprocal Cost allocation Using Solver
Particulars	Allocated costs	Service rates to		Allocation to
Particulars	Allocated costs	Info systems	Facilities	Info systems	Facilities
Info systems	$85,714.29	1.00	(0.20)	$85,714	($17,143)
Facilities	$57,142.86	(0.10)	1.00	($5,714)	$57,143
Total				$80,000	$40,000

Table (9)

2.

To determine

Ascertain the impact of the proposed plan and its overall impact.

2.

Expert Solution

Explanation of Solution

A new allocation base based on the floor space occupied, machine hours may provide a more similar value like the outside market cost. In such a case the market prices shall force a more competitive service department costs similar to the service costs of the outside suppliers.

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Answer 5

Chapter 7, Problem 39P

1.

To determine

Ascertain the cost allocated using each method of allocation.

1.

Expert Solution

Explanation of Solution

a) Direct method:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (1)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($80,000)	$40,000	$10,000	$30,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($40,000)	$17,776	$11,112	$11,112

Particulars	Programming	Consult	Training
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$57,776	$21,112	$41,112

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$217,776	$211,112	$166,112

Table (2)

b.1) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (3)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	20%	40%	10%	30%
Allocation amount ($80,000)	$16,000	$32,000	$8,000	$24,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($56,000)	$24,886	$15,557	$15,557

Particulars	Programming	Consult	Training
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$56,886	$23,557	$39,557

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$216,886	$213,557	$164,557

Table (4)

b.2) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (5)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	10%	40%	25%	25%
Allocation amount ($40,000)	$4,000	$16,000	$10,000	$10,000

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($84,000)	$42,000	$10,500	$31,500

Particulars	Programming	Consult	Training
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$58,000	$20,500	$41,500

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$218,000	$210,500	$166,500

Table (6)

c) Reciprocal method

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (7)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Allocation percentage	40%	10%	30%
Allocation amount ($85,714.29)	$34,286	$8,571	$25,714

Facilities
Particulars	Programming	Consult	Training
Allocation percentage	40%	25%	25%
Allocation amount ($57,142.86)	$22,857	$14,286	$14,286

Particulars	Programming	Consult	Training
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$57,143	$22,857	$40,000

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$217,143	$212,857	$165,000

Table (8)

Compute the base for allocation:

Reciprocal Cost allocation Using Solver
Particulars	Allocated costs	Service rates to		Allocation to
Particulars	Allocated costs	Info systems	Facilities	Info systems	Facilities
Info systems	$85,714.29	1.00	(0.20)	$85,714	($17,143)
Facilities	$57,142.86	(0.10)	1.00	($5,714)	$57,143
Total				$80,000	$40,000

Table (9)

2.

To determine

Ascertain the impact of the proposed plan and its overall impact.

2.

Expert Solution

Explanation of Solution

A new allocation base based on the floor space occupied, machine hours may provide a more similar value like the outside market cost. In such a case the market prices shall force a more competitive service department costs similar to the service costs of the outside suppliers.

Answer 6

Chapter 7, Problem 39P

1.

To determine

Ascertain the cost allocated using each method of allocation.

1.

Expert Solution

Explanation of Solution

a) Direct method:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (1)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($80,000)	$40,000	$10,000	$30,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($40,000)	$17,776	$11,112	$11,112

Particulars	Programming	Consult	Training
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$57,776	$21,112	$41,112

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$217,776	$211,112	$166,112

Table (2)

b.1) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (3)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	20%	40%	10%	30%
Allocation amount ($80,000)	$16,000	$32,000	$8,000	$24,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($56,000)	$24,886	$15,557	$15,557

Particulars	Programming	Consult	Training
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$56,886	$23,557	$39,557

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$216,886	$213,557	$164,557

Table (4)

b.2) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (5)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	10%	40%	25%	25%
Allocation amount ($40,000)	$4,000	$16,000	$10,000	$10,000

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($84,000)	$42,000	$10,500	$31,500

Particulars	Programming	Consult	Training
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$58,000	$20,500	$41,500

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$218,000	$210,500	$166,500

Table (6)

c) Reciprocal method

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (7)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Allocation percentage	40%	10%	30%
Allocation amount ($85,714.29)	$34,286	$8,571	$25,714

Facilities
Particulars	Programming	Consult	Training
Allocation percentage	40%	25%	25%
Allocation amount ($57,142.86)	$22,857	$14,286	$14,286

Particulars	Programming	Consult	Training
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$57,143	$22,857	$40,000

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$217,143	$212,857	$165,000

Table (8)

Compute the base for allocation:

Reciprocal Cost allocation Using Solver
Particulars	Allocated costs	Service rates to		Allocation to
Particulars	Allocated costs	Info systems	Facilities	Info systems	Facilities
Info systems	$85,714.29	1.00	(0.20)	$85,714	($17,143)
Facilities	$57,142.86	(0.10)	1.00	($5,714)	$57,143
Total				$80,000	$40,000

Table (9)

Answer 7

Chapter 7, Problem 39P

1.

To determine

Ascertain the cost allocated using each method of allocation.

Answer 8

1.

Expert Solution

Explanation of Solution

a) Direct method:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (1)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($80,000)	$40,000	$10,000	$30,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($40,000)	$17,776	$11,112	$11,112

Particulars	Programming	Consult	Training
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$57,776	$21,112	$41,112

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$40,000	$10,000	$30,000
Facilities	$17,776	$11,112	$11,112
Total Amount Allocated	$217,776	$211,112	$166,112

Table (2)

b.1) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (3)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	20%	40%	10%	30%
Allocation amount ($80,000)	$16,000	$32,000	$8,000	$24,000

Facilities
Particulars	Programming	Consult	Training
Service percentage	40%	25%	25%
Allocation percentage	44.44%	27.78%	27.78%
Allocation amount ($56,000)	$24,886	$15,557	$15,557

Particulars	Programming	Consult	Training
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$56,886	$23,557	$39,557

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$32,000	$8,000	$24,000
Facilities	$24,886	$15,557	$15,557
Total Amount Allocated	$216,886	$213,557	$164,557

Table (4)

b.2) Split-off method if info systems are split first:

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (5)

Compute the total costs allocated:

Particulars	Facilities	Programming	Consult	Training
Service percentage	10%	40%	25%	25%
Allocation amount ($40,000)	$4,000	$16,000	$10,000	$10,000

Info systems
Particulars	Programming	Consult	Training
Service percentage	40%	10%	30%
Allocation percentage	50.00%	12.50%	37.50%
Allocation amount ($84,000)	$42,000	$10,500	$31,500

Particulars	Programming	Consult	Training
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$58,000	$20,500	$41,500

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Facilities	$16,000	$10,000	$10,000
Info systems	$42,000	$10,500	$31,500
Total Amount Allocated	$218,000	$210,500	$166,500

Table (6)

c) Reciprocal method

Compute the base for allocation:

Departmental Cost Allocation Bases
Particulars	Info systems	Facilities	Programming	Consult	Training
Info systems		$600	$1,200	$300	$900
		20%	40%	10%	30%
Facilities	$240		$960	$600	$600
	10%		40%	25%	25%
Total Amount	$80,000	$40,000	$160,000	$190,000	$125,000

Table (7)

Compute the total costs allocated:

Info systems
Particulars	Programming	Consult	Training
Allocation percentage	40%	10%	30%
Allocation amount ($85,714.29)	$34,286	$8,571	$25,714

Facilities
Particulars	Programming	Consult	Training
Allocation percentage	40%	25%	25%
Allocation amount ($57,142.86)	$22,857	$14,286	$14,286

Particulars	Programming	Consult	Training
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$57,143	$22,857	$40,000

Particulars	Programming	Consult	Training
First phase allocation	$160,000	$190,000	$125,000
Info systems	$34,286	$8,571	$25,714
Facilities	$22,857	$14,286	$14,286
Total Amount Allocated	$217,143	$212,857	$165,000

Table (8)

Compute the base for allocation:

Reciprocal Cost allocation Using Solver
Particulars	Allocated costs	Service rates to		Allocation to
Particulars	Allocated costs	Info systems	Facilities	Info systems	Facilities
Info systems	$85,714.29	1.00	(0.20)	$85,714	($17,143)
Facilities	$57,142.86	(0.10)	1.00	($5,714)	$57,143
Total				$80,000	$40,000

Table (9)

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

Ascertain the impact of the proposed plan and its overall impact.

2.

Expert Solution

Explanation of Solution

A new allocation base based on the floor space occupied, machine hours may provide a more similar value like the outside market cost. In such a case the market prices shall force a more competitive service department costs similar to the service costs of the outside suppliers.

Answer 13

2.

To determine

Ascertain the impact of the proposed plan and its overall impact.

Answer 14

2.

Expert Solution

Explanation of Solution

A new allocation base based on the floor space occupied, machine hours may provide a more similar value like the outside market cost. In such a case the market prices shall force a more competitive service department costs similar to the service costs of the outside suppliers.