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. Departments Sourcing Operations Assembly Finishing Total Total Labor Hours Used by Departments Assembly 40,000 60,000 Sourcing 10,000 Sourcing Operations The costs incurred in the plant are as follows: Departmental Costs Operations 20,000 a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing $ 171,000 215,000 414,000 259,000 $ 1,059,000 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 tot costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) Finishing 60,000 - 50,000 Total Service Department Cost Allocated Total Production Cost
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. Departments Sourcing Operations Assembly Finishing Total Total Labor Hours Used by Departments Assembly 40,000 60,000 Sourcing 10,000 Sourcing Operations The costs incurred in the plant are as follows: Departmental Costs Operations 20,000 a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing $ 171,000 215,000 414,000 259,000 $ 1,059,000 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 tot costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) Finishing 60,000 - 50,000 Total Service Department Cost Allocated Total Production Cost
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter5: Support Department And Joint Cost Allocation
Section: Chapter Questions
Problem 8E
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Step 1: Define Cost Allocation
VIEWStep 2: Computation of cost allocation to 2 production departments using Direct method
VIEWStep 3: Computation of cost allocation using Step Method
VIEWStep 4: Computation of cost allocation using Reciprocal Method
VIEWStep 5: Calculation of total costs in production department after allocation
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