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 Operations Sourcing Sourcing Operations 10,000 The costs incurred in the plant are as follows: Departments Departmental Costs Sourcing $ 186,000 Operations 240,000 Assembly 424,000 Finishing 269,000 Total $ 1,119,000 Assembly Finishing 20,000 40,000 60,000 60,000 50,000 Required: 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.)
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 Operations Sourcing Sourcing Operations 10,000 The costs incurred in the plant are as follows: Departments Departmental Costs Sourcing $ 186,000 Operations 240,000 Assembly 424,000 Finishing 269,000 Total $ 1,119,000 Assembly Finishing 20,000 40,000 60,000 60,000 50,000 Required: 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.)
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter4: Accounting For Factory Overhead
Section: Chapter Questions
Problem 9E: A manufacturing company has two service and two production departments. Human Resources and Machine...
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Step 1: Introduction of cost of production
VIEWStep 2: Calculation of Allocated overhead as per direct method
VIEWStep 3: Calculation of Allocated overhead as per Step method
VIEWStep 4: Calculation of Allocated overhead as per Reciprocal method
VIEWStep 5: Total cost in the production department after allocation
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