Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 17, Problem 34P
To determine
Allocate the service department costs of company R using the reciprocal-services method in combination with the dual-allocation approach.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Check image file for question
Q1a. Allocate the service department costs to the two operating departments using the direct method.
b.Allocate the service department cost to the two operating departments using ,I)the step-down method (Allocate administrative service first) . ii)the step down method (Allocoate Maintenance service first)
c. Assuming you are the manager of the Daily Patient department.Discuss which method of cost allocation would you prefer.Justify your decision
d.Mr Smith the financial controller of LabAid is convinced that the step-down method allocates more costs to the operating departments than the direct method.Do you agree with ,Mr Smith.Explain.
What are the differences between single and dual rate allocation? Explain with suitable examples.
b) Provide a numerical example for single rate allocation and dual rate allocation and explain the process of allocating support department costs to the operating department, assuming that:
The company has two support departments “S1 & S2” and two operating departments “O1 & O2.”
The company use the direct method to allocate support department costs.
Note: You are required to provide numerical examples assuming the values of your own and they should not be copied from any sources.
Refer to Exhibit 3–12, which portrays the three types of allocation procedures used in two-stage allocation. Give an example of each of these allocation procedures in a hospital setting. The ultimate cost object is a patient-day of hospital care. This is one day of care for one patient. (Hint: First think about the various departments in a hospital. Which departments deal directly with patients; which ones are service departments and do not deal directly with patients? What kinds of costs does a hospital incur that should be distributed among all of the hospital’s departments? Correct hospital terminology is not important here. Focus on the concepts of cost allocation portrayed in Exhibit 3–12.)
Chapter 17 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Should actual or budgeted service department costs...Ch. 17 - Prob. 4RQCh. 17 - Why does dual cost allocation improve the...Ch. 17 - What potential behavioral problem can result when...Ch. 17 - Should actual or budgeted service department costs...Ch. 17 - Explain the difference between two-stage...Ch. 17 - Define the following terms: joint production...Ch. 17 - Prob. 10RQ
Ch. 17 - Describe the relative-sales-value method of joint...Ch. 17 - Define the term net realizable value, and explain...Ch. 17 - Are joint cost allocations useful? If they are,...Ch. 17 - For what purpose should the managerial accountant...Ch. 17 - Prob. 15ECh. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Tuscaloosa National Bank has two service...Ch. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Breakfasttime Cereal Company manufactures two...Ch. 17 - Refer to the data given in the preceding exercise....Ch. 17 - Refer to the data given in Exercise 1720....Ch. 17 - Prob. 23ECh. 17 - Prob. 24PCh. 17 - Prob. 25PCh. 17 - Celestial Artistry Company is developing...Ch. 17 - Snake River Sawmill manufactures two lumber...Ch. 17 - Travelcraft Company manufactures a complete line...Ch. 17 - Biondi Industries is a manufacturer of chemicals...Ch. 17 - Berger Company manufactures products Delta, Kappa,...Ch. 17 - Prob. 31PCh. 17 - Lafayette Company manufactures two products out of...Ch. 17 - Refer to the data given in Problem 1726 for...Ch. 17 - Prob. 34PCh. 17 - Top Quality Fruit Company, based on Oahu, grows,...Ch. 17 - Prob. 36C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Part 1: Allocate the costs of the 3 service departments using the direct method. Part 2: Allocate the costs of the 3 service departments using the step method, with the order determined by the greater percentage usage. Part 3: Allocate the costs of the 3 service departments using the reciprical method. Part 4:What is one strength and one drawback of each of the methods?arrow_forwardAllocate the two support departments’ costs to the two operating departments using the reciprocal method. Use (a) linear equations and (b) repeated iterations.arrow_forwardDirect Method Seattle Western University has provided the following data to be used in its service department cost allocations: Required: Using the direct method, allocate the costs of the service departments to the two operating departments. Allocate the Administration cost on the basis of student credit-hours and the Facility Services cost on the basis of space occupied.arrow_forward
- Discuss two different criteria Mr. Smith can use to determine the sequence for allocating support department costs using the step-down method.arrow_forwardAllocate the two support departments’ costs to the two operating departments using the following methods: The Algebraic/reciprocal method?arrow_forwardUnk The costs of the Accounting Department at Central Hospital would be considered by the Surgery Department to be: A. a) direct costs. B. b) indirect costs. C. c) incremental costs. D. d) opportunity costs. E. e) sunk costs.arrow_forward
- Lackawanna Community College has three divisions: Liberal Arts, Sciences, and Business Administration. The college's comptroller is trying to decide how to allocate the costs of the Admissions Department, the Registrar's Department, and the Computer Services Department. The comptroller has compiled the following data for the year just ended. Department Annual Cost Admissions $ 118,000 Registrar 197,000 Computer Services 420, 000 Division Budgeted Enrollment Budgeted Credit Hours Planned Courses Requiring Computer Work Liberal Arts 1,100 31,000 12 Sciences 850 28,750 25 Business Administration 750 22,750 25 Required: 1. Distribute the departmental costs to the college's three divisions based on the allocation base given. 2. Choose the better allocation base for distributing the cost to the following departments:Recuired: Dustroule the depurtmerital costs to the collegels three dwaish based on the allocation bus ghen Chose the betier aliscation base for distr buting the cost to the…arrow_forward1. Allocate the support departments' costs to the operating departmens using the direct method. 2. Rank the support departments based on the % of their services provided to other support departments. Use this ranking to allocate the support departments' costs to the operating departments based on the step-down method. 3. How could you have ranked teh support departments differently?arrow_forwardZamboanga Hospital plans to use the activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: (Refer to image) Determine the activity cost associated with Patient 2. a. P1,388 b. P 908 c. P1,816 d. P4,555arrow_forward
- There are four steps in the two-stage cost allocation process using ABC. Which of the following not one of those steps? Select a cost driver for each activity cost pool. O Identify and classify activities. Identify the volume-based cost driver. O Form activity cost pools and assign indirect costs to each pool.arrow_forwardMack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair and Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for the month of March follow: Department Fabricating Finishing Repair Quality Control Direct Costs Repair $ 149,600 112, 200 48,300 90,300 Required A 0 0.8 Required B Proportion of Services Used by Quality Control Fabricating Required: Use the step method to allocate the service costs, using the following: 0.2 0 a. The order of allocation starts with Repair. b. The allocations are made in the reverse order (starting with Quality Control). Complete this question by entering your answers in the tabs below. 0.6 0.1 Cost Allocation To: Finishing 0.2 0.1 Use the step method to allocate the service costs, using the following: The order of allocation starts with Repair. Note: Amounts to be deducted should be indicated by a minus sign. Do not round…arrow_forwardUse the information below or using Exhibit 12.14 on page 577 in Zelman to answer the following questions. Calculate the per unit cost of an initial visit using both the conventional and ABC approaches. Calculate the per unit cost of a regular visit using both the conventional and ABC approaches. Calculate the per unit cost of an intensive visit using both the conventional and ABC approaches. Exhibit 12-14 Basic data and calculation of unit costs using a conventional approach Total Cost by Visit Type Basic Data A B C D Initial Regular Intensive Total (Given) (Given) (Given) (A + B + C) 1 Number of visits 8,000 26,000 8,600 42,600 2 Direct materials (etc.) $40,000 $50,000 $65,000 $155,000 3 Direct labor $100,000 $120,000 $280,000 $500,000…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
How to Estimate Project Costs: A Method for Cost Estimation; Author: Online PM Courses - Mike Clayton;https://www.youtube.com/watch?v=YQ2Wi3Jh3X0;License: Standard Youtube License