EBOOK COST MANAGEMENT
8th Edition
ISBN: 9781307659184
Author: BLOCHER
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 41P
To determine
Ascertain the cost allocated using each method of allocation.
Expert Solution & Answer
Explanation of Solution
a) Direct method:
Compute the base for allocation:
| Departmental Cost Allocation Bases | |||||
| Particulars | Information Technology | Operations | Claims Process | Administration | Sales |
| Information Technology | 20% | 20% | 40% | 20% | |
| Operations | 10% | 10% | 50% | 30% | |
| Total Amount | $600,000 | $1,800,000 | $450,000 | $850,000 | $650,000 |
Table (1)
Compute the total costs allocated:
| Information Technology | |||
| Particulars | Claims Process | Administration | Sales |
| Service percentage | 20% | 40% | 20% |
| Allocation percentage | 25% | 50.00% | 25.00% |
| Allocation amount ($600,000) | $150,000 | $300,000 | $150,000 |
| Operations | |||
| Particulars | Claims Process | Administration | Sales |
| Service percentage | 10% | 50% | 30% |
| Allocation percentage | 11.1111% | 55.5556% | 33.3333% |
| Allocation amount ($1,800,000) | $200,000 | $1,000,001 | $599,999 |
| Particulars | Claims Process | Administration | Sales |
| Information Technology | $150,000 | $300,000 | $150,000 |
| Operations | $200,000 | $1,000,001 | $599,999 |
| Total Amount Allocated | $350,000 | $1,300,001 | $749,999 |
| Particulars | Claims Process | Administration | Sales |
| First phase allocation | $450,000 | $850,000 | $650,000 |
| Information Technology | $150,000 | $300,000 | $150,000 |
| Operations | $200,000 | $1,000,001 | $599,999 |
| Total Amount Allocated | $800,000 | $2,150,001 | $1,399,999 |
Table (2)
b.1) Split-off method if info systems are split first:
Compute the base for allocation:
| Departmental Cost Allocation Bases | |||||
| Particulars | Information Technology | Operations | Claims Process | Administration | Sales |
| Information Technology | 20% | 20% | 40% | 20% | |
| Operations | 10% | 10% | 50% | 30% | |
| Total Amount | $600,000 | $1,800,000 | $450,000 | $850,000 | $650,000 |
Table (3)
Compute the total costs allocated:
| Particulars | Operations | Claims Process | Administ-ration | Sales |
| Service percentage | 20% | 20% | 40% | 20% |
| Allocation amount ($600,000) | $120,000 | $120,000 | $240,000 | $120,000 |
| Operations | ||||
| Particulars | Claims Process | Administ-ration | Sales | |
| Service percentage | 10% | 50% | 30% | |
| Allocation percentage | 11.1111% | 55.5556% | 33.3333% | |
| Allocation amount ($1,920,000) | $213,333 | $1,066,668 | $639,999 | |
| Particulars | Claims Process | Administ-ration | Sales | |
| First phase allocation | $450,000 | $850,000 | $650,000 | |
| Information Technology | $120,000 | $240,000 | $120,000 | |
| Operations | $213,333 | $1,066,668 | $639,999 | |
| Total Amount Allocated | $783,333 | $2,156,668 | $1,409,999 | |
Table (4)
b.2) Split-off method if info systems are split first:
Compute the base for allocation:
| Departmental Cost Allocation Bases | |||||
| Particulars | Information Technology | Operations | Claims Process | Administration | Sales |
| Information Technology | 20% | 20% | 40% | 20% | |
| Operations | 10% | 10% | 50% | 30% | |
| Total Amount | $600,000 | $1,800,000 | $450,000 | $850,000 | $650,000 |
Table (5)
Compute the total costs allocated:
| Particulars | Operations | Claims Process | Administ-ration | Sales |
| Service percentage | 10% | 10% | 50% | 30% |
| Allocation amount ($1,800,000) | $180,000 | $180,000 | $900,000 | $540,000 |
| Information Technology | ||||
| Particulars | Claims Process | Administ-ration | Sales | |
| Service percentage | 20% | 40% | 20% | |
| Allocation percentage | 25% | 50.00% | 25.00% | |
| Allocation amount ($780,000) | $195,000 | $390,000 | $195,000 | |
| Particulars | Claims Process | Administ-ration | Sales | |
| First phase allocation | $450,000 | $850,000 | $650,000 | |
| Operations | $180,000 | $900,000 | $540,000 | |
| Information Technology | $195,000 | $390,000 | $195,000 | |
| Total Amount Allocated | $825,000 | $2,140,000 | $1,385,000 | |
Table (6)
c) Reciprocal method
Compute the base for allocation:
| Departmental Cost Allocation Bases | |||||
| Particulars | Information Technology | Operations | Claims Process | Administration | Sales |
| Information Technology | 20% | 20% | 40% | 20% | |
| Operations | 10% | 10% | 50% | 30% | |
| Total Amount | $600,000 | $1,800,000 | $450,000 | $850,000 | $650,000 |
Table (7)
Compute the total costs allocated:
| Information Technology | |||
| Particulars | Claims Process | Administration | Sales |
| Allocation percentage | 20% | 40% | 20% |
| Allocation amount ($795,918.37) | $159,184 | $318,367 | $159,184 |
| Operations | |||
| Particulars | Claims Process | Administration | Sales |
| Allocation percentage | 10% | 50% | 30% |
| Allocation amount ($1,959,183.67) | $195,918 | $979,592 | $587,755 |
| Particulars | Claims Process | Administration | Sales |
| First phase allocation | $450,000 | $850,000 | $650,000 |
| Information Technology | $159,184 | $318,367 | $159,184 |
| Operations | $195,918 | $979,592 | $587,755 |
| Total Amount Allocated | $805,102 | $2,147,959 | $1,396,939 |
Table (8)
Compute the base for allocation:
| Reciprocal Cost allocation Using Solver | |||||
| Particulars | Allocated costs | Service rates to | Allocation to | ||
| Information Technology | Operations | Information Technology | Operations | ||
| Information Technology | $795,918.37 | 1.00 | (0.20) | $795,918 | ($159,184) |
| Operations | $1,959,183.67 | (0.10) | 1.00 | ($195,918) | $1,959,184 |
| Total | $600,000 | $1,800,000 | |||
Table (9)
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
I need assistance with this general accounting question using appropriate principles.
None
Xavi Enterprises has provided the following projections for 2025: The company's fixed costs are expected to be $194,000. The selling price per unit is $16, while the variable cost per unit is $6. The company aims to earn a net income of $82,000 during 2025. The required sales units to meet the target net income during 2025 is _ (rounded up to the nearest whole number).
Chapter 7 Solutions
EBOOK COST MANAGEMENT
Ch. 7 - Prob. 1QCh. 7 - Explain the difference between joint products and...Ch. 7 - Prob. 3QCh. 7 - What are the three methods of departmental cost...Ch. 7 - Prob. 5QCh. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - What are the limitations of joint product and...Ch. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 -
What is the amount of service department cost...Ch. 7 - Prob. 12BECh. 7 - Prob. 13BECh. 7 - Prob. 14BECh. 7 - Prob. 15BECh. 7 - Prob. 16BECh. 7 - Prob. 17BECh. 7 - Prob. 18BECh. 7 - Prob. 19BECh. 7 - Brief Exercises 7-17 through 7-20 require the...Ch. 7 - Prob. 21ECh. 7 - Prob. 22ECh. 7 - Prob. 23ECh. 7 - Prob. 24ECh. 7 - Great Ape Glassworks manufactures glass used for...Ch. 7 - Cost allocation is often the centerpiece of...Ch. 7 - Prob. 27ECh. 7 - Prob. 28ECh. 7 - Robinson Products Company has two service...Ch. 7 - Donation of blood through the American Red Cross...Ch. 7 - Tango Company produces joint products M, N, and T...Ch. 7 - Arkansas Corporation manufactures liquid chemicals...Ch. 7 - Webster Company produces 25,000 units of product...Ch. 7 - Marin Company produces two software products...Ch. 7 - Logan Products has two production...Ch. 7 - McKeoun Enterprises is a large machine tool...Ch. 7 - Barfield Corporation prepares business plans and...Ch. 7 - Solexx Corporation allocates its service...Ch. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Prob. 47PCh. 7 - Prob. 48PCh. 7 - Prob. 49PCh. 7 - Prob. 50P
Knowledge Booster
Similar questions
- Kelvin Apparel uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Four years after its purchase, one of Kelvin's warehouses has a carrying value of $520,000 and a tax basis of $410,000. There were no other temporary differences and no permanent differences. Taxable income was $5.5 million and Kelvin's tax rate is 35%. What is the deferred tax liability to be reported in the balance sheet?arrow_forwardDo fast answer of this general accounting questionarrow_forward5 POINTSarrow_forward
- Given the solution and accounting questionarrow_forwardDora Manufacturing reported the following data for the current period: The actual cost of direct labor per hour is $29.50. The standard cost of direct labor per hour is $26.00.The direct labor hours allowed per finished unit is 1.10 hours. During the current period, 5,800 units of finished goods were produced using 6,100 direct labor hours. How much is the direct labor rate variance?arrow_forwardA 1 DATE VALUE VALUE FORMULA Use E6 "Problem Date" for green cells in col. E & I C D E F G H VALUE MEASURE VALUE FORMULA MEASURE 1 Current Date (TODAY) 9 Current Time (NOW) #N/A #N/A Cumulative full days this year Year to date fraction (YEARFRAC) Use E6 "Problem Date" for green cells in col. E & I 2 3 4 548 5 3835 6 40468 Problem Date 7 Year (YEAR) 8 Date Value Fractional Date Month (MONTH) 9 40468.25 10 40468.375 11 40468.625 12 Day (DAY) End of month Start of month 13 Start of next month 14 15 DATE DATA CLEANUP and MANIPULATION First day of the year 10/8/2019 #N/A #N/A #N/A #N/A #N/A #N/A #N/A Month to date fraction of year Day of the week TIP: Use custom date format to display as the name of the day (dddd) Name of month #N/A #N/A #N/A #N/A #N/A Workdays in current month #N/A 30 workdays (excluding weekends) from today #N/A Days between today and 30 workdays from now #N/A 16 Target $2,000 17 18 DATE REVENUE MONTH DAY OF WEEK Hit Target? MONTH FORMULAS for TABLE COLUMNS C through E…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education