Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) 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 Using Department Transactions IT Operations Retail Commercial Ө Ө 70% 30% 10% Ө 20% 30% 40% 50% Ө Ө 10% 40% $ 390,000 $ 810,000 $ 1,650,000 $ 3,850,000 $ 2,400,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. From: Costs Operations Allocated to: Transactions Retail Commercial IT $ 810,000 $ 162,000 $ 81,000 $ 243,000 $ 324,000 Operations Transactions Total $ 243,000 $ 324,000

Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) 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 Using Department Transactions IT Operations Retail Commercial Ө Ө 70% 30% 10% Ө 20% 30% 40% 50% Ө Ө 10% 40% $ 390,000 $ 810,000 $ 1,650,000 $ 3,850,000 $ 2,400,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. From: Costs Operations Allocated to: Transactions Retail Commercial IT $ 810,000 $ 162,000 $ 81,000 $ 243,000 $ 324,000 Operations Transactions Total $ 243,000 $ 324,000

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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Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-3, 4) 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: Supplying Department Using Department Processing Administration Maintenance Branches Electronic Processing 0 40 % 0 15 % 45 % Administration 0 0 0 60 % 40 % Maintenance 10 % 20 % 0 20 % 50 % Direct cost $ 89,000 $ 590,000 $ 310,000 $ 4,900,000 $ 1,950,000 Required: Allocate the service department costs to the two operating departments using the reciprocal method.
Problem 11-66 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-4, 5) 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. Using Department Supplying Department Processing Administration Maintenance Direct cost Processing Administration 0 0 10% $86,000 Variable costs Fixed costs Total costs Avoidable fixed costs C. 50% 0 20% a. Processing Department b. Administration Department Maintenance Department $590,000 Maintenance 0 0 0 $256,000 Maximum Amount Branches 10% 60% 20% $4,400,000 The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows. Processing Administration Maintenance Branches $133,000 $1,800,000 $60,000 26,000 $153,000 437,000 123,000 2,600,000 $86,000 $256,000 $4,400,000 $590,000 $276,000 $ 8,000…
Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) 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 Transactions Total 8 18% 70% $ 310,000 IT Costs Operations S 250,000 $ 750,000 670,000 x 1,510,000 x Using Department Operations 8 8 8 $ $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. x Answer is complete but not entirely correct. Allocated to: Transactions 250,000 XS 2,233,333 x $ 8 30% 8 $ 1,570,000 $ 3,770,000 Retail 0X X $ Retail OX 0x 0 Commercial S 70% 30% 18% 833,333 X 0x 0 x 833,333 Commercial 30% 38% 28 $ 2,320,000
Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) 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 Transactions Total 8 10% 70% $ 310,000 IT Using Department Operations Costs Operations S 250,000 $ 750,000 670,000 X 1,510,000 x 8 8 8 $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. Answer is complete but not entirely correct. Allocated to: Transactions $ 250,000 $ 2,233,333 x 8 30% 8 $ 1,570,000 $ Retail Retail 0X $ 0.x 0x 0 Commercial S $ 3,770,000 78% 30% 10% 833,333 X 0x 0x 833,333 Commercial 36% 38% 28% $ 2, 320, 000
Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Additional data concerning the usage of the activities by the various customers are also provided: Required: (Note: Round answers to two decimal places.) 1. Calculate a cost per account per year by dividing the total cost of processing and maintaining checking accounts by the total number of accounts. What is the average fee per month that the bank should charge to cover the costs incurred because of checking accounts? 2. Calculate a cost per account by customer category by using activity rates. 3. Currently, the bank offers free checking to all of its customers. The interest revenues average 90 per account; however, the interest revenues earned per account by category are 80, 100, and 165 for the low-, medium-, and high-balance accounts, respectively. Calculate the average profit per account (average revenue minus average cost from Requirement 1). Then calculate the profit per account by using the revenue per customer type and the unit cost per customer type calculated in Requirement 2. 4. CONCEPTUAL CONNECTION After the analysis in Requirement 3, a vice president recommended eliminating the free checking feature for low-balance customers. The bank president expressed reluctance to do so, arguing that the low-balance customers more than made up for the loss through cross-sales. He presented a survey that showed that 50% of the customers would switch banks if a checking fee were imposed. Explain how you could verify the presidents argument by using ABC.
Algebraic method The following chart indicates the percentage of support department services used by other departments. Service departments are designated S1, S2, and S3; operating departments are designated RP1 and RP2. Services Used S3 Department S1 S2 N/A 10% 40% N/A S1 S2 S3 20 30 N/A RP1 RP2 20% 30% 40% 30 20 10 40 10 Direct costs of the period were $170,000, $360,000, and $600,000 for S1, S2, and S3, respectively. Allocate the support department costs to the operating departments using the algebraic method. Note: Do not round proportions in your calculations; round your final answer to the nearest whole dollar. Note: Round your final answers below to the nearest 100; for example, round 8,668 to 8,700.
Calculating ABC Unit Costs Perkins National Bank has collected the following information for four activities and two types of credit cards: Activity Driver Classic Gold Activity Rate ($) Processing transactions Transactions processed 12,000 7,200 0.20 Preparing statements Number of statements 12,000 7,200 0.95 Answering questions Number of calls 24,000 36,000 4.00 Providing ATMs ATM transactions 48,000 14,400 1.50 There are 5,000 holders of Classic cards and 21,000 holders of the Gold cards. Required: Calculate the unit cost (rounded to the nearest cent) for Classic and Gold credit cards. Unit cost for Classic $fill in the blank 1 Unit cost for Gold $fill in the blank 2
Calculating ABC Unit Costs Perkins National Bank has collected the following information for four activities and two types of credit cards: Activity Driver Classic Gold Activity Rate ($) Processing transactions Transactions processed 12,000 7,200 0.20 Preparing statements Number of statements 12,000 7,200 0.95 Answering questions Number of calls 24,000 36,000 4.00 Providing ATMs ATM transactions 48,000 14,400 1.50 There are 4,900 holders of Classic cards and 20,400 holders of Gold cards. Required: Calculate the unit cost (rounded to the nearest cent) for Classic and Gold credit cards. Unit cost for Classic: Unit cost for Gold:
Exercise 11-33 (Algo) Cost Allocation: Direct Method (LO 11-1) 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 Accounting HR IT 8% 10% The direct costs of the service departments in the previous period were $91,750 for IT, $119,000 for Accounting, and $162,500 for HR. HR allocation Total costs allocated Accounting HR West East 81% 40% 20% 40% 0% 40% 60% 10% 60% 20% Required: Use the direct method to allocate the service department costs to the production departments. Note: Amounts to be deducted should be indicated by a minus sign. Do not round Intermediate calculations. Service department costs IT allocation Accounting allocation IT Accounting HR West East
> Calculating ABC Unit Costs Perkins National Bank has collected the following information for four activities and two types of credit cards: Activity Driver Classic Gold Activity Rate Processing transactions Transactions processed 12,000 7,200 $0.20 Preparing statements Number of statements 12,000 7,200 0.95 Answering questions Number of calls 24,000 36,000 4.00 ATM transactions 48,000 14,400 1.50 Providing ATMS There are 7,500 holders of Classic cards and 30,000 holders of Gold cards. Required: Calculate the unit cost (rounded to the nearest cent) for Classic and Gold credit cards. Unit cost for Classic Unit cost for Gold 35.66 X 9.07 X
please answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image) Robinson Products Company has two service departments (S1 and S2) and two production departments (P1 and P2). The distribution of each service department’s efforts (in percentages) to the other departments is: From To S1 S2 P1 P2 S1 — 10% 20% ?% S2 10% — ? 30 The direct operating costs of the departments (including both variable and fixed costs) are: S1 $ 180,000 S2 60,000 P1 50,000 P2 120,000 Required: 1. Determine the total cost of P1 and P2 using the direct method. 2. Determine the total cost of P1 and P2 using the step method. 3. Determine the total cost of P1 and P2 using the reciprocal method.
Cost Direct Center Cost Proportion of Services used by: S1 S2 S3 P1 P2 P3 S1 P120,000 .10 .30 .25 .20 .15 S2 80,000 .20 .40 .20 .20 S3 45,000 .60 .35 .05 P1 78,000 P2 99,000 P3 45,000 __________26. Under the step method which department will allocate its direct cost first? __________27. Under the step method which department will allocate its direct cost last? __________28. Using the algebraic method, how much is the total costs to be allocated by S1 to all departments? __________29. Using algebraic method, how…