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After starting his first full-time position for a private company, Paul was anxious to go above and beyond the expectations of his supervisor. So, when Karen asked him to complete the support department cost allocations for all departments using the same method as they used last year, he thought, "Here's my chance!" In addition to the step method that this company was currently using. Paul remembered learning two other methods for allocating these costs-the direct method and the reciprocal method. The two operating segments of this company reflect their locations-Suburban and Downtown. The two support departments are Administrative Services and Maintenance Services. Their costs have been allocated by administrative hours and maintenance hours. respectively, Here are the relevant costs and usages for all four of these departments. Original cost Administrative hours used Maintenance hours used i Costs Support Departments Administrative $55,000 Suburban 200 Operating Departments Suburban Downtown $39,000 $173,000 $214.000 Maintenance Operating Departments 100 Rank the two support departments based on their original cost (as was done last year), and allocate the support department costs using the step method. (250 350 Downtown 150 650

After starting his first full-time position for a private company, Paul was anxious to go above and beyond the expectations of his supervisor. So, when Karen asked him to complete the support department cost allocations for all departments using the same method as they used last year, he thought, "Here's my chance!" In addition to the step method that this company was currently using. Paul remembered learning two other methods for allocating these costs-the direct method and the reciprocal method. The two operating segments of this company reflect their locations-Suburban and Downtown. The two support departments are Administrative Services and Maintenance Services. Their costs have been allocated by administrative hours and maintenance hours. respectively, Here are the relevant costs and usages for all four of these departments. Original cost Administrative hours used Maintenance hours used i Costs Support Departments Administrative $55,000 Suburban 200 Operating Departments Suburban Downtown $39,000 $173,000 $214.000 Maintenance Operating Departments 100 Rank the two support departments based on their original cost (as was done last year), and allocate the support department costs using the step method. (250 350 Downtown 150 650

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
Section: Chapter Questions
Problem 39P: Randy Harris, controller, has been given the charge to implement an advanced cost management system....
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After starting his first full-time position for a private company, Paul was anxious to go above and beyond the expectations of his supervisor. So, when Karen asked him to complete the support department cost allocations for all departments using the same method as they used last year, he thought, "Here's my chance!" In addition to the step method that this company was currently using. Paul remembered learning two other methods for allocating these costs-the direct method and the reciprocal method. The two operating segments of this company reflect their locations-Suburban and Downtown. The two support departments are Administrative Services and Maintenance Services. Their costs have been allocated by administrative hours and maintenance hours, respectively. Here are the relevant costs and usages for all four of these departments. Original cost Administrative hours used Maintenance hours used (a) Costs $ Support Departments Administrative $55,000 Suburban 200 Operating Departments Maintenance Suburban $173,000 $ $39,000 100 Operating Departments Downtown 250 Rank the two support departments based on their original cost (as was done last year), and allocate the support department costs using the step method. 350 Downtown $214.000 150 650
Transcribed Image Text:After starting his first full-time position for a private company, Paul was anxious to go above and beyond the expectations of his supervisor. So, when Karen asked him to complete the support department cost allocations for all departments using the same method as they used last year, he thought, "Here's my chance!" In addition to the step method that this company was currently using. Paul remembered learning two other methods for allocating these costs-the direct method and the reciprocal method. The two operating segments of this company reflect their locations-Suburban and Downtown. The two support departments are Administrative Services and Maintenance Services. Their costs have been allocated by administrative hours and maintenance hours, respectively. Here are the relevant costs and usages for all four of these departments. Original cost Administrative hours used Maintenance hours used (a) Costs $ Support Departments Administrative $55,000 Suburban 200 Operating Departments Maintenance Suburban $173,000 $ $39,000 100 Operating Departments Downtown 250 Rank the two support departments based on their original cost (as was done last year), and allocate the support department costs using the step method. 350 Downtown $214.000 150 650
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