Support department cost allocation-reciprocal services methodDavis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support theproduction of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department areallocated based on asset value. Information about each department is provided in the following table:Machine hoursAsset valueMaintenanceDepartment800$2,000$36,000FeedbackSecurityDepartment2,000$1,670$16,000CuttingDepartmentProduction departments' total costs $ 63,436 XCuttingDepartment7,200$2,500$64,000Department costDetermine the total cost of each production department after allocating all support department costs to the production departments using the reciprocalservices method.SewingDepartment$ 96,299.2 XSewingDepartment10,800$5,500$82,000Check My WorkThe reciprocal services method considers all inter-support-department service, and thus is the most accurate of the three support departmentallocation methods. The proportional usage of each support department's cost driver by the other departments to which its costs are to beallocated must be determined. Then, the support department costs are allocated simultaneously among the departments.

Overhead : Indirect costs incurred while producing goods or services. Overhead costs cannot be…

Support department cost allocation-reciprocal services method Davis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department are allocated based on asset value. Information about each department is provided in the following table: Machine hours Asset value Maintenance Department 800 $2,000 $36,000 Feedback Production departments' total costs Security Department 2,000 $1,670 $16,000 Cutting Department Cutting Department 63,436 X Department cost Determine the total cost of each production department after allocating all support department costs to the production departments using the reciprocal services method. 7,200 $2,500 $64,000 Sewing Department $ 96,299.2 X Sewing Department 10,800 $5,500 $82,000 Check My Work The reciprocal services method considers all inter-support-department service, and thus is the most accurate of the three support department allocation methods. The proportional usage of each support department's cost driver by the other departments to which its costs are to be allocated must be determined. Then, the support department costs are allocated simultaneously among the departments.

15th Edition

ISBN:9781337912020

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

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

Chapter5: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 6E: Davis Snowflake Co. produces Christmas stockings in its Cutting and Sewing departments. The...