Exercise 11-30 (Static) Cost Allocation: Step Method (LO 11-3) PDF

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Summary

Learning Objective: 11-03
Allocate service department
costs using the step method....

Description

4.





Award:

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow. Proportion of Services Used by Direct Costs $99,000 64,400 40,000 32,000

Department Machining Assembly Maintenance Cafeteria

Maintenance

Cafeteria

Machining

Assembly

— 0.8

0.2 —

0.5 0.1

0.3 0.1

Required: Use the step method to allocate the service costs, using the following: a. The order of allocation starts with Maintenance. b. The allocations are made in the reverse order (starting with Cafeteria).

Complete this question by entering your answers in the tabs below.

Required A

Required B

The order of allocation starts with Maintenance. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) To From Service department costs

Maintenance $

Maintenance

Cafeteria

40,000



(40,000)



$

Cafeteria Total Costs

$

0

$

Required A

 References



Worksheet

Difficulty: 2 Medium

Exercise 11-30 (Static) Cost Allocation: Step Method (LO 11-3)

Learning Objective: 11-03 Allocate service department costs using the step method.

Machining

32,000



8,000



(40,000)



0

$

Assembly

20,000



20,000



40,000

$

Required B

12,000



20,000



32,000

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow. Proportion of Services Used by Direct Costs $99,000 64,400 40,000 32,000

Department Machining Assembly Maintenance Cafeteria

Maintenance

Cafeteria

Machining

Assembly

— 0.8

0.2 —

0.5 0.1

0.3 0.1

Required: Use the step method to allocate the service costs, using the following: a. The order of allocation starts with Maintenance. b. The allocations are made in the reverse order (starting with Cafeteria).

Complete this question by entering your answers in the tabs below.

Required A

Required B

The allocations are made in the reverse order (starting with Cafeteria). (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) To From

Cafeteria

Service department costs

$

Cafeteria

Maintenance

32,000

$

(32,000)

Maintenance Total Costs

F

$

0

F

$

Required A

Machining

Assembly

40,000 25,600

3,200

3,200

(65,600)

41,000

24,600

0

F

$

44,200

F

$

27,800

Required B

 Explanation: a. Step Method—Maintenance first: Maintenance: $8,000 = 20% × $40,000; $20,000 = 50% × $40,000; $12,000 = 30% × $40,000. Cafeteria: $40,000 = $32,000 direct costs + $8,000 from Maintenance. $20,000 =

0.1 (0.1 + 0.1)

× $40,000

$20,000 =

0.1 (0.1 + 0.1)

× $40,000

b. Step Method—Cafeteria First: Cafeteria: $25,600 = 80% × $32,000; $3,200 = 10% × $32,000; $3,200 = 10% × $32,000. Maintenance: $65,600 = $40,000 direct costs + $25,600 from Cafeteria.



$41,000 =

0.5 (0.5 + 0.3)

× $65,600

$24,600 =

0.3 (0.5 + 0.3)

× $65,600...