Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities: Budgeted overhead (base) Information Systems (computer hours) Facilities (square feet) C. a. Direct Method b. Service Departments Information Systems $ 112,000 Step Method (Information Systems Goes First) Step Method (Facilities Goes First) Reciprocal method 240 Facilities $ 56,000 600 Computer Programming $ 224,000 1,200 960 Production Departments Information Systems Consulting $ 266,000 Required: 1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments and determine the total cost of each production department using these three methods: a. Direct method. b. Step method (both for the information systems department going first and for the facilities department going first). c. Reciprocal method. Programming Consulting (For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $1 due to rounding.) 300 600 Training Software Training $ 175,000 900 600 69 $ $ $ Total $ 833,000 3,000 2,400 Total 0 0 0 0
Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities: Budgeted overhead (base) Information Systems (computer hours) Facilities (square feet) C. a. Direct Method b. Service Departments Information Systems $ 112,000 Step Method (Information Systems Goes First) Step Method (Facilities Goes First) Reciprocal method 240 Facilities $ 56,000 600 Computer Programming $ 224,000 1,200 960 Production Departments Information Systems Consulting $ 266,000 Required: 1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments and determine the total cost of each production department using these three methods: a. Direct method. b. Step method (both for the information systems department going first and for the facilities department going first). c. Reciprocal method. Programming Consulting (For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $1 due to rounding.) 300 600 Training Software Training $ 175,000 900 600 69 $ $ $ Total $ 833,000 3,000 2,400 Total 0 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ashvin
![Required information
[The following information applies to the questions displayed below.]
Data Performance, a computer software consulting company, has three major functional areas: computer programming,
information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total
costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs,
Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the
direct method, the step method, and the reciprocal method. She assembled the following data from the two service
departments, information systems and facilities:
Budgeted overhead (base)
Information Systems (computer hours)
Facilities (square feet)
C.
Service Departments
a Direct Method
b.
Information
Systems
$ 112,000
240
Step Method (Information Systems Goes First)
Step Method (Facilities Goes First)
Reciprocal method
Computer
Facilities Programming
$ 56,000
600
$ 224,000
1,200
960
Production Departments
Information
Systems
Consulting
$ 266,000
Required:
1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the
application base for the facilities department, apply overhead from these service departments to the production departments and
determine the total cost of each production department using these three methods:
a. Direct method.
b. Step method (both for the information systems department going first and for the facilities department going first).
c. Reciprocal method.
Programming Consulting
300
600
(For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $1
due to rounding.)
Training
Software
Training
$ 175,000
900
600
$
$
$
$
Total
Total
$ 833,000
3,000
2,400
0
0
0
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff037e2cd-7b50-4b80-b3b1-2cc9a863b421%2F65c37b69-45c7-434c-a7de-ba8df1bfb55b%2F2a3co1b_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Data Performance, a computer software consulting company, has three major functional areas: computer programming,
information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total
costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs,
Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the
direct method, the step method, and the reciprocal method. She assembled the following data from the two service
departments, information systems and facilities:
Budgeted overhead (base)
Information Systems (computer hours)
Facilities (square feet)
C.
Service Departments
a Direct Method
b.
Information
Systems
$ 112,000
240
Step Method (Information Systems Goes First)
Step Method (Facilities Goes First)
Reciprocal method
Computer
Facilities Programming
$ 56,000
600
$ 224,000
1,200
960
Production Departments
Information
Systems
Consulting
$ 266,000
Required:
1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the
application base for the facilities department, apply overhead from these service departments to the production departments and
determine the total cost of each production department using these three methods:
a. Direct method.
b. Step method (both for the information systems department going first and for the facilities department going first).
c. Reciprocal method.
Programming Consulting
300
600
(For all requirements, do not round intermediate calculations. Round final answers to the nearest dollar. Totals may be off by $1
due to rounding.)
Training
Software
Training
$ 175,000
900
600
$
$
$
$
Total
Total
$ 833,000
3,000
2,400
0
0
0
0
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VIEWStep 2: Computation of percentage of Computer hours and Square feet
VIEWStep 3: Cost allocation using Direct method
VIEWStep 4: Cost allocation using Step Method (Info. system First)
VIEWStep 5: Cost allocation using Step Method (Facilities First)
VIEWStep 6: Cost allocation using Reciprocal Method
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