RST LTD has two production departments: Machining and Finishing. There are three service departments: Human Resources (HR), Maintenance and Design. The budget costs in three service departments are as follows: HR Maintenance Design $ $ Variable 1,00,000 1,60,000 1,00,000 Fixed 4,00,000 3,00,000 6,00,000 5,00,000 4,60,000 7,00,000 The usage of these Service Department's output during the years just completed is as follows: Provision of Service Output ( in hours of service) Providers of Service Users of Service HR Maintenance Design HR Maintenance 500 Design Machining Finishing 500 500 4,000 3,500 4,500 5,000 10,000 4,000 1,500 Total 8,000 6,000 Required : (i) Use the direct method to re-apportion RST Ltd's service department cost to its production departments. Determine the proper sequence to use in re-apportioning the firm's service department (ii) cost by step-down method. Use the step-down method to reapportion the firm's service department cost according to (iii) Hours of Service

RST LTD has two production departments: Machining and Finishing. There are three service departments: Human Resources (HR), Maintenance and Design. The budget costs in three service departments are as follows: HR Maintenance Design $ $ Variable 1,00,000 1,60,000 1,00,000 Fixed 4,00,000 3,00,000 6,00,000 5,00,000 4,60,000 7,00,000 The usage of these Service Department's output during the years just completed is as follows: Provision of Service Output ( in hours of service) Providers of Service Users of Service HR Maintenance Design HR Maintenance 500 Design Machining Finishing 500 500 4,000 3,500 4,500 5,000 10,000 4,000 1,500 Total 8,000 6,000 Required : (i) Use the direct method to re-apportion RST Ltd's service department cost to its production departments. Determine the proper sequence to use in re-apportioning the firm's service department (ii) cost by step-down method. Use the step-down method to reapportion the firm's service department cost according to (iii) Hours of Service

Name: RST LTD has two production departments: Machining and Finishing. Ther
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Description: RST LTD has two production departments: Machining and Finishing. There are threeservice departments: Human Resources (HR), Maintenance and Design. The budget costs in threeservice departments are as follows:Design$HRMaintenance$$Variable1,00,0001,60

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 28E: Minor Co. has a job order cost system and applies overhead based on departmental rates. Service...

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Minor Co. has a job order cost system and applies overhead based on departmental rates. Service Department 1 has total budgeted costs of 168,000 for next year. Service Department 2 has total budgeted costs of 280,000 for next year. Minor allocates service department costs solely to the producing departments. Service Department 1 cost is allocated to producing departments on the basis of machine hours. Service Department 2 cost is allocated to producing departments on the basis of direct labor hours. Producing Department 1 has budgeted 8,000 machine hours and 12,000 direct labor hours. Producing Department 2 has budgeted 2,000 machine hours and 12,000 direct labor hours. What is the total cost allocation from the two service departments to Producing Department 1? a. 173,600 b. 140,000 c. 134,400 d. 274,400
Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing cost information for the next year: If Adam uses the step-down (sequential) method, beginning with the Maintenance Department, to allocate support department costs to production departments, the total overhead (rounded to the nearest dollar) for the Machining Department to allocate to its products would be: a. 407,500. b. 422,750. c. 442,053. d. 445,000.
John Sheng, a cost accountant at Starlet Company, is developing departmental factory overhead application rates for the companys Tooling and Fabricating departments. The budgeted overhead for each department and the data for one job are as follows: Using the departmental overhead application rates, total overhead applied to Job 231 in the Tooling and Fabricating departments will be: a. 225. b. 303. c. 537. d. 671.
Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: a. Determine the activity rate for each activity. b. Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round to the nearest cent.
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