Use the information below to answer the two questions that follow.A company has two service departments and two operating departments. The company allocates service departmental costs tooperating departments using the direct method. Operating data for these departments for last year are as follows:Service DepartmentdOperating DepartmentCafeteriaCustodialCuttingMoldingDepartmental costs$144,000$84,000$21,200$52,50090Number of employees353060Square feet occupied1,6008002,1001,500Q. What is the total Molding Department cost after allocation under the direct method?ANS. $Q. The company is considering to switch to the step-down method. Unther this method, Cafeteria costs are allocated first on the basisof number of employees and Custodial costs are allocated second on the basis of square feet occupied. What is the total MoldingDepartment cost after allocation under the step-down method?ANS. $

Direct Method: Under direct method, service department costs are allocated to production departments…

Use the information below to answer the two questions that follow. A company has two service departments and two operating departments. The company allocates service departmental costs to Operating departments using the direct method. Operating data for these departments for last year are as follows: Service Departmentd Operating Department Cafeteria Custodial Cutting Molding Departmental costs $144,000 $84,000 $21,200 $52,500 Number of employees 35 30 60 90 Square feet occupied 1,600 800 2,100 1,500 Q. What is the total Molding Department cost after allocation under the direct method? ANS. $ Q. The company is considering to switch to the step-down method. Unther this method, Cafeteria costs are allocated first on the of number of employees and Custodial costs are allocated second on the basis of square feet occupied. What is the total Molding Department cost after allocation under the step-down method? ANS. $

Use the information below to answer the two questions that follow. A company has two service departments and two operating departments. The company allocates service departmental costs to Operating departments using the direct method. Operating data for these departments for last year are as follows: Service Departmentd Operating Department Cafeteria Custodial Cutting Molding Departmental costs $144,000 $84,000 $21,200 $52,500 Number of employees 35 30 60 90 Square feet occupied 1,600 800 2,100 1,500 Q. What is the total Molding Department cost after allocation under the direct method? ANS. $ Q. The company is considering to switch to the step-down method. Unther this method, Cafeteria costs are allocated first on the of number of employees and Custodial costs are allocated second on the basis of square feet occupied. What is the total Molding Department cost after allocation under the step-down method? ANS. $

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...

See similar textbooks

Similar questions

Crane, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Units sold Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud 2,700 $63,000 28,800 12,600 5,400 $16,200 Wise 4,500 $45,000 23,400 17,100 9,000 $(4,500) Er 1,800 $36,000 14,400 10,800 3,600 $7,200 Total 9,000 $144,000 66,600 40,500 18,000 $18,900 All of the allocated costs will continue even if a division is discontinued. Crane allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Crane is concerned that it should be discontinued. Crane thinks that if the division is closed, that sales at the Bud division will increase by 12% while sales at the Er division will stay the same.
Mach Co. operates three manufacturing departments as profit centers. The following information is available for its most recent year: Dept. Sales 1 2 3 $1,100,000 430,000 710,000 Cost of goods sold $735,000 156,500 305,000 Direct expenses Indirect expenses $110,000 $85,000 40,200 105,000 165,000 21,000 Which department has the greatest departmental contribution to overhead and what is the amount contributed? Group of answer choices Dept. 3; $430,000 Dept. 1; $255,000 Dept. 2; $110,000 Dept. 3; $240,000 Dept. 2; $156,500
Morrell Financial Services (MFS) has three service departments: Accounting, Information Technology (IT), and Personnel. MFS also has two operating departments (Advice and Brokerage). Data on service department usage and service direct costs follow: Accounting IT Personnel Direct cost Using Department Accounting IT Personnel Advice 0% 16% 6% 23% 31% Brokerage 40% 0% 10% 29% 45% 11% 13% 0% 39% 37% $ 197,000 $ 281,000 $ 264,500 NA NA* *Not applicable for this problem. Required: Assume that Morrell Financial Services uses the reciprocal method of service department cost allocation. What is the total service department cost allocated to Advice? To Brokerage? (Hint: Use the reciprocal method spreadsheet shown in Exhibit 11.22 as a start to your analysis.) Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollars. Advice Brokerage Cost Allocated
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
Guna publishing company has three service departments & two operating departments. Selected data from a recent period on five departments as follows: Cost type Service Departments Operating departments Total A B C 1 2 Overhead costs $140,000 $105,000 $48,000 $275,000 $430,000 $998,000 Number of employees 60 35 140 315 210 760 Space occupied 15,000 10,000 20,000 40,000 100,000 185,000 Hours of press time - - - 30,000 60,000 90,000 The company allocated service department costs by the step method in the following order. A (number of employees). B (Space occupied), & C (hours of press time). The company makes no distinction between variable & fixed service department costs. Required: 1) Assuming that the company used the direct method, how much overhead cost would be allocated to each operating departments? 2) Using the step method, allocate the service department costs to the…
A company has three production departments and two service departments, and for a period the departmental distribution summary has the following totals : $ Production Departments : P1-$800 ; P2–$700 and P3-$500 Service Departments :S1–$234 and S2–$300 2,000 534 2,543 The expenses of the service departments are charged out on a percentage basis as follows: P1 P2 P3 s1 S2 Service Department S1 20% 40% 30% 10% Service Department S2 40% 20% 20% 20% Prepare a statement showing the apportionment of two service departments expenses to Production Departments by Simultaneous Equation Method.
The centralized computer technology department of Hardy Company has expenses of $320,000. The department has provided a total of 4,000 hours of service for the period. The Retail Division has used 2,750 hours of computer technology service during the period, and the Commercial Division has used 1,250 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 $fill in the blank 2
Brant Consulting designs costing and transfer pricing system for its clients. Here is a summary of volume, revenue, and cost expectations for the upcoming year: Item Costing Projects Per Per Unit 75 Jobs Total Unit 50 Jobs $10,000 $500,000 $15,000 $1,125,000 $1,625,000 4,500 225,000 11,500 862,500 1,087,500 Contribution margin $5,500 $275,000 $3,500 $262,500 $537,500 Fixed cost 473,000 Profit $64,500 Assume a constant sales mix. (a) How many Costing systems must Brant Consulting sell to breakeven? How many Transfer Pricing systems must Brant Consulting sell to breakeven? (b) How many Costing systems must Brant Consulting sell to achieve a target profit of $86,000? How many Costing systems must Brant Consulting sell to achieve a target profit of $86,000? Transfer Pricing Projects Revenue Variable cost Firm X X X x Round up the total number of systems before determining the allocation between Costing and Transfer Pricing.
Susan Hansen is the manager of American Autos. American Autos provides three types of services, Sales, Repairs, and Rebuilds. Susan needs to provide a profit analysis to the CEO at the end of the current fiscal year so the pricing and marketing strategies can be adjusted as needed. She has gathered the following information for the company. Cost # of employees Maint Hours HR Hours: Revenue Marketing $219,000 Sales $992,000 5 50 100 Support Departments Maintenance $320,000 Repairs $1,302,000 7 300 25 HR $49,000 Rebuilds $2,108,000 2 25 180 Sales $364,000 12 800 1,200 Operating Units Repairs $870,000 16 1,900 Rebuilds $1,098,000 6 2,600 800
DJH Enterprises has 3 departments. Operating results for 2019 are as follows: Department 1 Department 2 Department 3 Sales $938,000 $450,800 $1,198,400 Variable Costs 623,000 401,800 842,800 Contribution Margin $315,000 $49,000 $355,600 Direct fixed expenses $168,000 $37,800 $228,200 Common fixed expenses 105,000 42,000 131,600 Total fixed expenses $273,000 $79,800 $359,800 Operating income (loss) $42,000 $(30,800) $(4,200) DJH is considering eliminating the departments that show losses. Assume that the direct fixed expenses could be avoided if the department is eliminated.What effect would elimination of Department 2 have on DJH’s total operating income? Select one: a. It would increase total operating income by $42,000. b. It would decrease total operating income by $7,000. c. It would decrease total operating income by $49,000. d. It would increase total operating income by $30,800. e. It would decrease total operating income by $11,200.
Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below: Total Company Division L Division QSales $ 517,000 $ 156,000 $ 361,000 Variable expenses 255,960 82,680 173,280 Contribution margin 261,040 73,320 187,720 Traceable fixed expenses 171,000 49,000 122,000 Segment margin 90,040 $ 24,320 $ 65,720 Common fixed expenses 87,890 Net operating income $ 2,150 The break-even in sales dollars for Division Q is closest to:
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