Support activity cost allocation Jake’s Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production activities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenance costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information regarding the activities is provided in the following table: Maintenance Security Mining Cutting Number of service calls 17 20 60 20 Machine hours 89 88 182 176 Asset value $200,000 $80,000 $300,000 $300,000 Department cost $25,000 $42,500 $160,000 $95,000 2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services method and the most appropriate cost driver for Maintenance. Maintenance Department Security Department Mining Department Cutting Department Maintenance cost allocation $fill in the blank 3 $fill in the blank 4 $fill in the blank 5 Security cost allocation $fill in the blank 6 $fill in the blank 7 $fill in the blank 8 Production activities total costs $fill in the blank 9 $fill in the blank 10 3. Assume Jake’s Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated from each support activity to the other activities. Particulars Mining Department Cutting Department Maintenance cost $fill in the blank 11 $fill in the blank Security cost $fill in the blank 13 $fill in the blank Production activities total cost $fill in the blank 15 $fill in the blank
Support activity cost allocation
Jake’s Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production activities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenance costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information regarding the activities is provided in the following table:
Maintenance | Security | Mining | Cutting | |
Number of service calls | 17 | 20 | 60 | 20 |
Machine hours | 89 | 88 | 182 | 176 |
Asset value | $200,000 | $80,000 | $300,000 | $300,000 |
Department cost | $25,000 | $42,500 | $160,000 | $95,000 |
2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services method and the most appropriate cost driver for Maintenance.
Maintenance Department |
Security Department |
Mining Department |
Cutting Department |
|
Maintenance cost allocation | $fill in the blank 3 | $fill in the blank 4 | $fill in the blank 5 | |
Security cost allocation | $fill in the blank 6 | $fill in the blank 7 | $fill in the blank 8 | |
Production activities total costs | $fill in the blank 9 | $fill in the blank 10 |
3. Assume Jake’s Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated from each support activity to the other activities.
Particulars | Mining Department |
Cutting Department |
Maintenance cost | $fill in the blank 11 | $fill in the blank |
Security cost | $fill in the blank 13 | $fill in the blank |
Production activities total cost | $fill in the blank 15 | $fill in the blank |
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