BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic andInternational. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of numberof transactions. A summary of BluStar operations follows.AdministrationAccountingDomesticInternationalEmployeesTransactionsDepartment direct costs22453336,00019,000$945,00076,000$3,670,000$361,000$149,000Required: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.X Answer is not complete.Complete this question by entering your answers in the tabs below.Required ARequired BRequired CAllocate the cost of the service departments to the operating departments using the step method. Start with Administration.(Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)TоFromAdministrationAccountingDomesticInternational2$361,000 $Department costsAdministration allocation149,000(361,000)Accounting allocationTotal cost24$24149,000$2424< Required ARequired C BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic andInternational. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of numberof transactions. A summary of BluStar operations follows.Administration AccountingDomesticInternationalEmployees224533Transactions36,000$361,00019,000$945,00076,000Department direct costs$149,000$3,670,000Required: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 methocAnswer is not complete.Complete this question by entering your answers in the tabs below.Required ARequired BRequired CAllocate the cost of the service departments to the operating departments using the reciprocal method. (Do not roundintermediate calculations. Negative amounts should be indicated by a minus sign. Round your final answers to the nearestwhole dollar amounts.)ToFromAdministrationAccountingDomesticInternationalDepartment costsAdministration allocationAccounting allocationTotal cost24< Required BRequired C

The service department costs can be allocated to operating departments using various methods as…

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 numbe of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions Department direct costs 22 45 33 36,000 $361,000 19,000 $945,000 76,000 $3,670,000 $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.

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 numbe of transactions. A summary of BluStar operations follows. Administration Accounting Domestic International Employees Transactions Department direct costs 22 45 33 36,000 $361,000 19,000 $945,000 76,000 $3,670,000 $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.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 7E: Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments,...

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Profit center responsibility reporting On-Demand Sports Co. operates two divisions—the Action Sports Division and the Team Sports Division. The following income and expense accounts were provided as of November 30. 20Y1, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded The bases to be used in allocating expenses, together with other essential information, are as follows a.Advertising expense—incurred al headquarters, charged back to divisions on the basis of usage: Action Sports Division. $1,200,000; Team Sports Division, $1,800,000. b. Transportation expense—charged hack lo divisions at a charge rale of $18.50 per bill of lading: Action Sports Division, 14.000 bills of lading; Team Sports Division. 21.400 bills of lading. C. Accounts receivable collection expense—incurred al headquarters, charged back to divisions at a charge rate of $9-00 per invoice: Action Sports Division. 32.000 sales invoices; Team Sports Division, 12.500 sales invoices. d. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Action Sports Division. 120.000 square feet; Team Sports Division. 80.000 square feet. Prepare divisional income statements with two column headings: Action Sports Division and Team Sports Division. Provide supporting schedules for determining service department charges.
Service department charges In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of 64,560, and the Purchasing Department had expenses of 40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: A. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. B. Using the cost driver information in (A), determine the annual amount of payroll and purchasing costs allocated to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. C. Why does the Residential Division have a larger support department allocation than the other two divisions, even though its sales are lower?
COMPUTING OPERATING INCOME The sales, cost of goods sold, and total operating expenses of departments A and B of Ash Company are as follows: Compute the departmental operating income for each department.
Taylor Speedy has prepared the following list of statements about managerial accounting, financial accounting, and the functions of management. Identify each statement as true or false. Financial accounting centers on providing information to internal users. Staff positions are directly involved in the companys primary revenue-generating activities. Preparation of budgets is part of financial accounting. Managerial accounting applies only to merchandising and manufacturing companies. Both managerial accounting and financial accounting deal with many of the same economic events.
Profit center responsibility reporting for a service company Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31: The company operates three support departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the companys point of contact for new service, complaints, and requests for repair. The department believes that the number of customer contacts is a cost driver for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is a cost driver for this work. The following additional information has been gathered: Instructions 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: East, West, and Central. 2. Identify the most successful division according to the profit margin. Round to the nearest whole percent. 3. Provide a recommendation to the CEO for a better method for evaluating the performance of the divisions. In your recommendation, identify the major weakness of the present method.
Championship Sports Inc. operates two divisionsthe Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: The bases to be used in allocating expenses, together with other information, are as follows: a. Advertising expenseincurred at headquarters, allocated to divisions on the basis of usage: Winter Sports Division, 375,000; Summer Sports Division, 715,000. b. Transportation expenseallocated to divisions at a rate of 4.00 per bill of lading: Winter Sports Division, 17,500 bills of lading; Summer Sports Division, 30,500 bills of lading. c. Accounts receivable collection expenseincurred at headquarters, allocated to divisions at a rate of 1.00 per invoice: Winter Sports Division, 25,000 sales invoices; Summer Sports Division, 43,000 sales invoices. d. Warehouse expenseallocated to divisions on the basis of floor space used in storing division products: Winter Sports Division, 60,000 square feet; Summer Sports Division, 90,000 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting computations for support department allocations.
Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Support Department $459,200 Purchasing Department 96,900 Other corporate administrative expenses 545,000 Total corporate expense $1,101,100 The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows: Tech Support Purchasing Consumer Division 380 computers 1,900 purchase orders Commercial Division 180 3,800 Total 560 computers 5,700 purchase orders The service department charges of…
Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Support Department $1,130,400 Purchasing Department 231,000 Other corporate administrative expenses 585,000 Total corporate expense $1,946,400 The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows: Tech Support Purchasing Consumer Division 440 computers 5,400 purchase orders Commercial Division 280 10,000 Total 720 computers 15,400 purchase orders The service department charges of the…
Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Support Department $800,100 Purchasing Department 258,000 Other corporate administrative expenses 455,000 Total corporate expense $1,513,100 The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows: Tech Support Purchasing Consumer Division 390 computers 6,000 purchase orders Commercial Division 240 11,200 Total 630 computers 17,200 purchase orders The service department charges of the…
Power Sports Company has two divisions, Wholesale and Retail, and two corporate service departments, Tech Support and Accounts Payable. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Support Department $1,146,600 Accounts Payable Department 522,000 Other corporate administrative expenses 717,000 Total corporate expense $2,385,600 The other corporate administrative expenses include officers' salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Accounts Payable Department charges divisions for services, based on the number of checks issued. The usage of service by the two divisions is as follows: Tech Support Accounts Payable Wholesale Division 480 computers 6,100 checks Retail Division 300 11,300 Total 780 computers 17,400 checks The service department charges of the Tech Support…
The following data are taken from the management accounting reports of Dulcimer Co.: Div. A Div. B Div. C Income from operations $1,900,000 $1,450,000 $1,450,000 Total service department charges 1,700,000 1,050,000 1,100,000 If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that a. Divisions B and C's managers divide the bonus b. Division B's manager is given the bonus c. Division A's manager is given the bonus d. Division C's manager is given the bonus When management seeks to achieve personal departmental objectives that may work to the detriment of the entire company, the manager is experiencing a. budgetary slack b. cushions c. padding d. goal conflict The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. Product Number ofUnits Labor…
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows. Administration Communications Facilities Deposits Loans Direct costs $ 210,000 $ 320,000 $ 253,000 $ 7,590,000 $ 5,400,000 Employee hours 21,000 31,000 21,000 416,000 357,000 Number of employees 8 17 7 190 160 Square footage occupied 4,600 14,500 5,200 246,900 202,900 The costs of the service departments are allocated on the following bases: Administration, employee-hours; Communications, number of employees; and Facilities, square footage occupied. Required: a. Assume that the bank elects to distribute service department costs to production departments using the direct method. What amount of…