The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Westmoreland Company.DepartmentDirect CostsLabelSubassemblies$570,000P1Final assembly795,000Р2MarketingBuilding occupancy305,000P3105,000S1Research & development140,000S2Supervision65,000S3Use of services by other departments is as follows.User DepartmentsSub-FinalBuildingService Cost CenterassembliesAssemblyMarketingОссирancyR&DSupervisionBuilding occupancy0.300.200.200.150.15R&D0.500.50---------Supervision0.200.300.200.200.10The equation for department S1 (building occupancy) is:Multiple ChoiceS1 = $105,000 + 0.20S3.S1 = $105,000 + 0.80S2 + 0.20S3.S1 = $105,000 + 1.00S3.S1 = 0.20S3.

The reciprocal method uses simultaneous equations to allocate the costs incurred by service…

Answered: Multiple Choice S1 = $105,000 + 0.20S3.…

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Multiple Choice S1 = $105,000 + 0.20S3. S1 = $105,000 + 0.80S2 + O.20S3. S1 = $105,000 + 1.00S3. S1 = 0.20S3.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 23E: Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating...

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The following is a system of simultaneous linear equations to allocate costs using the reciprocal method. Matrix algebra is not required. The following costs were incurred in three operating departments and three service departments in Westmoreland Company. Department Direct Costs Label Subassemblies $570,000 P1 Final assembly 795,000 P2 Marketing Building occupancy 305,000 P3 105,000 S1 Research & development 140,000 S2 Supervision 65,000 S3 Use of services by other departments is as follows. User Departments Sub- Final Building Service Cost Center assemblies Assembly Marketing Оссирancy R&D Supervision Building occupancy 0.30 0.20 0.20 0.15 0.15 R&D 0.50 0.50 --- --- Supervision 0.20 0.30 0.20 0.20 0.10 The equation for department P3 (marketing) is: Multiple Choice P3 = $305,000 + 0.50S1 + 0.50S3. P3 = $305,000 + 0.20S1 + 0.70S2 + 0.20S3. P3 = $305,000 + 0.20S1 + 0.20S2 + 0.70S3. P3 = $305,000 + 0.20S1 + 0.20S3.
The costs allocated to each cost center are as follows: Q3: Cost Centers/Costs Production Department Service Department Total Cost Y A B Total of Primary Distribution There is a reciprocal relationship between cost centers. X Service Cost center based on the number of workers, Y Service Cost center will be apportioned on the base of 40.000 45.000 55.000 8.000 7.160 155.500 m2. A B X Y Total Number of Workers m2 152 4.500 114 1.350 76 2.700 20 450 38 300 400 9.300 a) Calculate the benefits received from each service department. b) Calculate the X Service Center's total cost subject to re-distribution. c) Calculate the Y Service Center's total cost subject to re-distribution. d) Re-allocate the cost of service cost centers
Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating support service costs by switching to the direct method. Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)
The cost behavior patterns below are lettered A through H. The vertical axes of the graphs represent total dollars of expense, and the horizontal axes represent production in units, machine hours, or direct labor hours. In each case, the zero point is at the intersection of the two axes. Each graph may be used no more than once. Required: Select the graph that matches the lettered cost described here. a. Depreciation of equipmentthe amount of depreciation charged is computed based on the number of machine hours that the equipment was operated. b. Electricity billflat fixed charge, plus a variable cost after a certain number of kilowatt hours are used. c. City water billcomputed as follows: d. Depreciation of equipmentthe amount is computed by the straight-line method. e. Rent on a factory building donated by the citythe agreement calls for a fixed fee payment, unless 200,000 labor hours are worked, in which case no rent need be paid. f. Salaries of repair workersone repair worker is needed for every 1,000 machine hours or less (i.e., 0 to 1,000 hours requires one repair worker, 1,001 to 2,000 hours requires two repair workers, etc.).
1. Describe the key features of the reciprocal method. 2. Allocate the support departments' costs (human resources and information systems) to the two operating departments using the reciprocal method. Use (a) linear equations and (b) repeated iterations. 3. In the case presented in this exercise, which method (direct, step-down, or reciprocal) would you recommend? Why? Direct allocation data Support Departments Operating Departments HR Info. Systems Corporate Consumer Total Costs incurred $90,000 $227,000 $994,000 $484,000 $1,795,000 Allocation of HR costs (90,000) 49,500 40,500 Allocation of Info. Systems costs (227,000) 158,900 68,100 Total budgeted costs of operating departments $0 $0 $1,202,400 $592,600 $1,795,000 A B C D E 1 SUPPORT DEPARTMENTS OPERATING DEPARTMENTS 2 Human Resources Information Systems…
Required information [The following information applies to the questions displayed below.] Fifth Street Publishing (FSP) was founded many years ago as a printing cooperative offering printing services to members. Most members were charitable and religious organizations. Ten years ago, FSP became a for-profit corporation, although it retained its commitment to the original member groups. It has two production departments, Member and Commercial. The Member Department handles printing jobs for nonprofit groups and Commercial serves the remaining customers. FSP is organized this way to facilitate its billing: FSP charges nonprofit customers a price equal to the full cost of the job, including allocated overhead; commercial jobs are priced based on what the market will bear. FSP has two service departments, Accounting and Computer Services (CS). Accounting costs are allocated based on number of employees, and CS costs are allocated based on computer time (hours). Selected percentage use…
Current Attempt in Progress Dr. Kimberly is evaluating her dental practice with her colleague, Dr. Matthew. Dr. Kimberly provides general dental services, while Dr. Matthew provides orthodontic care. They utilize shared business services (including human resources, billing, and purchasing) as well as shared maintenance services. Here is a summary of their costs and usages, where business services are allocated based on hours on task and maintenance costs are allocated based on square feet of space. Original cost Business services (proportion of time spent) Square feet of space (proportion of space used) Business Services $90,000 0.20 Maintenance Dental $56,000 $554,000 0.05 0.55 0.50 Orthodontics $386,000 0.40 0.30 Vi Ac
BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions 22 45 33 36,000 $361,000 19,000 $945,000 76,000 $3,670,000 Department direct costs $149,000 Required: a. Allocate the cost of the service departments to the operating departments using the direct method. b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration. c. Allocate the cost of the service departments to the operating departments using the reciprocal method. Complete this question by entering your answers in the tabs below. Required A Required B Required C Allocate the cost of the service departments to the operating departments…
Help Save & Exit Submit TB MC Qu. 7-52 (Algo) Eccles Corporation uses an activity-based costing... Eccles Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Wages and salaries Depreciation Utilities $ 318,000 247,000 206,000 $ 771,000 Total Distribution of resource consumption: Activity Cost Pools Setting Up Assembly Other Total Wages and salaries Depreciation Utilities 30% 10% 45% 25% 100% 30% 20% 60% 100% 50% 30% 100% How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool? Multiple Choice, hp
Required information [The following information applies to the questions displayed below.] The following information is departmental cost allocation with two service departments and two production departments. Department Service 1 (S1) Service 2 (S2) Production 1 (P1) Production 2 (P2) Cost $ 47,000 37,000 270,000 320,000 Service Department Cost Allocation Total Cost Percentage Service Provided to P1 S1 0% 20 S2 20% 0 What is the total cost in P1 and P2 and what is the amount of service department cost allocated to P1 and P2 using the step method with S1 going first? P1 40% 20 P2 P2 40% 60
Q3. ADLG Company has two support departments, SS1 and SS2, and two operating departments, OD1 and OD2. The company has decided to use the direct method and allocate variable SS1 dept. costs based on the number of transactions and fixed SS1 dept. costs based on the number of employees. SS2 dept. variable costs will be allocated based on the number of service requests and fixed costs will be allocated based on the number of computers. The following values have been extracted for the allocation | Total Department variable costs Total department fixed costs Number of transactions Number of employees Number of service requests Number of computers Support Departments SS1 16,000 19,500 50 18 37 20 SS2 19,000 34,000 You are required to allocate variable and fixed costs. 55 24 22 25 Operating Departments OD1 105,000 120,000 250 47 26 31 OD2 68,000 55,000 140 38 32 37
Required information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Felix & Company reports the following information. Period Units Produced Total Costs 1 0 $ 2,900 2 460 3,774 3 860 4,534 4 1,260 5,294 5 1,660 6,054 6 2,060 6,814 7 2,460 7,574 8 2,860 8,334 9 3,260 9,094 10 3,660 9,854 Exercise 21-6A (Algo) Appendix: Measuring costs using regression LO P1 Use spreadsheet software to use ordinary least-squares regression to estimate the cost equation, including fixed and variable cost amounts. Cost equation = + per unit