The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Westmoreland Company.DepartmentDirect CostsLabelSubassemblies$570,000P1Final assembly795,000P2MarketingBuilding occupancy305,000P3105,000S1Research & development140,000S2Supervision65,000S3Use of services by other departments is as follows.User DepartmentsSub-FinalBuildingService Cost CenterassembliesAssemblyMarketingОссирancyR&DSupervisionBuilding occupancy0.300.200.200.150.15R&D0.500.50------Supervision0.200.300.200.200.10The equation for department P3 (marketing) is:Multiple ChoiceP3 = $305,000 + 0.50S1 + 0.50S3.P3 = $305,000 + 0.20S1 + 0.70S2 + 0.20S3.P3 = $305,000 + 0.20S1 + 0.20S2 + 0.70S3.P3 = $305,000 + 0.20S1 + 0.20S3.

Deapartment costing refers to the process of allocation of total cost incurred to the different…

The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Westmoreland Company. Department Direct Costs Label Subassemblies $570,000 P1 Final assembly Marketing Building occupancy Research & development 795,000 P2 305,000 P3 105,000 si 140,000 S2 Supervision 65,000 S3 Jse of services by other departments is as follows. User Departments Sub- Final Building Service Cost Center assemblies Assembly Marketing Осcuрancy R&D Supervision Building occupancy 0.30 0.20 0.20 0.15 0.15 --- R&D 0.50 0.50 --- --- --- --- Supervision 0.20 8.30 0.20 0.20 0.10

The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Westmoreland Company. Department Direct Costs Label Subassemblies $570,000 P1 Final assembly Marketing Building occupancy Research & development 795,000 P2 305,000 P3 105,000 si 140,000 S2 Supervision 65,000 S3 Jse of services by other departments is as follows. User Departments Sub- Final Building Service Cost Center assemblies Assembly Marketing Осcuрancy R&D Supervision Building occupancy 0.30 0.20 0.20 0.15 0.15 --- R&D 0.50 0.50 --- --- --- --- Supervision 0.20 8.30 0.20 0.20 0.10

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 23E: Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating...

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Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating support service costs by switching to the direct method. Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)
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Required information [The following information applies to the questions displayed below.] Fifth Street Publishing (FSP) was founded many years ago as a printing cooperative offering printing services to members. Most members were charitable and religious organizations. Ten years ago, FSP became a for-profit corporation, although it retained its commitment to the original member groups. It has two production departments, Member and Commercial. The Member Department handles printing jobs for nonprofit groups and Commercial serves the remaining customers. FSP is organized this way to facilitate its billing: FSP charges nonprofit customers a price equal to the full cost of the job, including allocated overhead; commercial jobs are priced based on what the market will bear. FSP has two service departments, Accounting and Computer Services (CS). Accounting costs are allocated based on number of employees, and CS costs are allocated based on computer time (hours). Selected percentage use…
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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions 22 45 33 36,000 $361,000 19,000 $945,000 76,000 $3,670,000 Department direct costs $149,000 Required: a. Allocate the cost of the service departments to the operating departments using the direct method. b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration. c. Allocate the cost of the service departments to the operating departments using the reciprocal method. Complete this question by entering your answers in the tabs below. Required A Required B Required C Allocate the cost of the service departments to the operating departments…
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Sequential Method of Support Department CostAllocationRefer to Exercise 4-51 for data. Now assume that Stevenson uses the sequential method to allocate support department costs to the operating divisions. General Factory is allocated first inthe sequential method for the company.Required:1. Calculate the allocation ratios for Power and General Factory. (Note: Carry thesecalculations out to four decimal places.)2. Allocate the support service costs to the operating divisions. (Note: Round all amounts tothe nearest dollar.)3. Assume divisional overhead rates are based on direct labor hours. Calculate the overheadrate for the Battery Division and for the Small Motors Division. (Note: Round overheadrates to the nearest cent.)
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