Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Total Labor Hours Used by Departments Sourcing Operations Sourcing 10,000 Operations 20,000 The costs incurred in the plant are as follows: Departments Sourcing Operations Assembly Departmental Costs $ 222,000 300,000 Assembly 40,000 60,000 Finishing 60,000 50,000 Finishing Total Required: 448,000 293,000 $ 1,263,000 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) Total Service Department Cost Allocated Total Production Cost a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing
Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Total Labor Hours Used by Departments Sourcing Operations Sourcing 10,000 Operations 20,000 The costs incurred in the plant are as follows: Departments Sourcing Operations Assembly Departmental Costs $ 222,000 300,000 Assembly 40,000 60,000 Finishing 60,000 50,000 Finishing Total Required: 448,000 293,000 $ 1,263,000 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) Total Service Department Cost Allocated Total Production Cost a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing
(purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has
the following labor hours devoted by each of the service departments to the other departments.
Total Labor Hours Used by Departments
Sourcing
Operations
Sourcing
10,000
Operations
20,000
The costs incurred in the plant are as follows:
Departments
Sourcing
Operations
Assembly
Departmental
Costs
$ 222,000
300,000
Assembly
40,000
60,000
Finishing
60,000
50,000
Finishing
Total
Required:
448,000
293,000
$ 1,263,000
1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing
department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method?
2. What are the total costs in the production departments after allocation?
(For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
Total Service
Department Cost Total Production
Allocated
Cost
a. Direct Method
Assembly
Finishing
b. Step Method
Assembly
Finishing
c. Reciprocal Method
Assembly
Finishing
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