Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded. Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs andservice department usage ratios were recorded.Using DepartmentMaintenanceSupplyingDepartmentProcessingAdministrationProcessingAdministrationBranchesElectronic50%10%60%20%$4,200,00040%40%50%$2,200,000Maintenance10%20%Direct cost$91,000$540,000$263,000The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows.AdministrationElectronicProcessing$65,00026,000$91,000MaintenanceBranches$153,000387,000$540,000$134,000129,000$263,000$1,600,0002,600,000$4,200,000$1,250,000950,000$2,200,000Variable costsFixed costsTotal costsAvoidable fixed costs$ 6,000$284,000$ 83,000$ 650,000$ 650,000Required:a. If GECU outsources the Processing Department, what is the maximum it can pay an outside vendor without increasing total costs?b. If GECU outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs?c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs?MaximumAmountProcessing Departmentа.b.Administration DepartmentMaintenance DepartmentC.

Definition: Outsourcing: It is a practice in business where a company hires the outside party to…

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Business

Accounting

costs

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost From: Transactions IT Operations Transactions Total 0 10% 50% $ 340,000 IT Using Department Operations Costs Operations $ 760,000 $ 228,000 $ 1,828,000 1,536,000 0 0 0 $760,000 Allocated to: Transactions 30% 0 $ 1,600,000 Retail Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. 70% 30% 10% $ 3,800,000 Commercial Retail 76,000 $ 228,000 $ 228,000 914,000 182,800 731,200 1,075,200 460,800 $ 1,486,000 $ 1,420,000 Commercial 30% 30% 40% $ 2,350,000
Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost IT From: Operations Transactions Total Transactions 0 10% 60% $ 370,000 IT Using Department Operations 0 0 0 $ 790,000 Allocated to: Costs Operations Transactions 0 30% 0 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. Retail Retail $ 1,630,000 $ 3,830,000 0 70% 30% 10% Commercial 0 Commercial 30% 30% 30% $ 2,380,000
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Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Using Department Transactions IT Operations Retail Commercial Transactions 000 70% 30% IT 10 % 0 40% 30% 20% Operations 60% 0 0 10% 30% Direct cost $ 440,000 $860,000 $ 1,700,000 $3,900,000 $2,450,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method.
Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (West and East). The usage data for each of the service departments for the previous period follow: IT IT 05 10% Accounting HR 8% 20% 10% Allocation Service department costs IT allocation Accounting allocation HR allocation Total costs allocated 0% Accounting HR The direct costs of the service departments in the previous period were $184,650 for IT, $100,000 for Accounting, and $113,500 for HR. $ Required: Use the reciprocal method to allocate the service department costs to the production departments. (Matrix algebra is not required.) Note: Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations. IT West East 40% 40% 60% 60% 40% 20% 0 $ Accounting 0 $ HR 0 $ West 0 $ East 0
ervice Department Charges The centralized computer technology department of Hardy Company has expenses of $372,600. The department has provided a total of 13,800 hours of service for the period. The Retail Division has used 6,762 hours of computer technology service during the period, and the Commercial Division has used 7,038 hours of computer technology service. How much should each division be charged for computer technology department services? Do not round interim calculations. Retail Division $fill in the blank 1 Commercial Division $fill in the blank 2
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Crayzon Corportion has two service departments, S1 and S2; and two productiondepartments, P1 and P2. The data for April were as follows:Services provided to:Activity Costs S1 S2 P1 P2S1 $100,000 20% 40% 50%S2 $80,000 10% 55% 25%Fixed CostsP1 $400,000P2 $500,000Required:a. Set up algebraic equations in linear form for each activity.Page 4 of 6b. Determine total costs for each department by solving the equations from part(a) above using the reciprocal method.
To better match cost to revenues Lewisville Corporation distributes its service department overhead costs to producing departments. Information for April is presented here. Maintenance Utilities Overhead costs incurred $18,700 $9,000 Service provided to: Maintenance Dept. 10% Utilities Dept. 20% Producing Dept. A 40% 30% Producing Dept. B 40% 60% Using the step method, how much of Lewisville's Corporation’s Utilities Department cost is allocated between Departments A and B? (order of allocation begins with Maintenance) Group of answer choices $9,900 $10,800 $12,740 $27,700 In order to better match cost with revenues, Lewisville Corporation distributes its service department overhead costs to producing departments. Information for April is presented here. Maintenance Utilities Overhead costs incurred $18,700 $9,000 Service provided to: Maintenance Dept. 10% Utilities Dept. 20%…
The centralized computer technology department of Hardy Company has expenses of $61,600. The department has provided a total of 7,700 hours of service for the period. The Retail Division has used 6,083 hours of computer technology service during the period, and the Commercial Division has used 1,617 hours of computer technology service. How much should each division be allocated for computer technology department services? Do not round interim calculations. Retail Division $fill in the blank 1 Commercial Division