15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter5: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 5E: Crystal Scarves Co. produces winter scarves. The scarves are produced in the Cutting and Sewing...

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Question V – Allocate Costs with Reciprocal Method (8 Marks)

Anchor Company manufactures a variety of tool boxes. They have two operating divisions – Corporate Sales and Consumer Sales – and two support divisions –Admin and IT. Each operating division operates independently. Anchor uses the number of employees to allocate Admin costs and computer processing time to allocate IT costs. The following data are available for the month:

SUPPORT DEPT	OPERATING DEPT
	Admin	IT	Corp Sales	Cons. Sales
Budgeted costs before interdivision allocations
	$170,000	$400,000	$2,000,000	$1,000,000
Admin budgeted # of employees
		40	80	70
IT budgeted # of processing time
(in minutes)	600		4,000	3,400

REQUIRED:

Using the reciprocal method, allocate the support department costs.

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