Horngren's Cost Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (16th Edition)
16th Edition
ISBN: 9780134642444
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 15, Problem 15.29P
Fixed-cost allocation. Central University completed construction of its newest administrative building at the end of 2017. The University’s first employees moved into the building on January 1, 2018. The building consists of office space, common meeting rooms (including a conference center), a cafeteria, and even a workout room for its exercise enthusiasts. The total 2018 building space of 250,000 square feet was utilized as follows:
| Usage of Space | % of Total Building Space |
| Office space (occupied) | 52% |
| Vacant office space | 8% |
| Common area and meeting space | 17% |
| Workout room | 8% |
| Cafeteria | 15% |
The new building cost the university $40 million and was
- 1. How much of the total annual building cost of $2,000,000 will be allocated in 2018 to each of the departments, if the cost is allocated to each department on the basis of the following?
- a. Actual usage of the three departments
- b. Planned office space of the three departments
- c. Practical capacity of the three departments
- 2. Assume that Central University allocates the total annual building cost of $2,000,000 in the following manner:
- a. All vacant office space is absorbed by the university and is not allocated to the departments.
- b. All occupied office space costs are allocated on the basis of actual square footage used by each department.
- c. All common area costs are allocated on the basis of a department’s practical capacity. Calculate the cost allocated to each department in 2018 under this plan. Do you think the allocation method used here is appropriate? Explain.
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Students have asked these similar questions
How much of the total annual building cost of $2,000,000 will be allocated in 2018 to each of the departments, if the cost is allocated to each department on the basis of the following?
a. Actual usage of the three departments
b. Planned office space of the three departments
c. Practical capacity of the three departments
For the last quarter of 2020, Carica’s cost records indicate the following:
Materials
Requisitions (MR)
Utility
Services (US)
Machining
Assembly
Total
Budgeted overhead costs before any inter- department cost
allocations
$200,000
$1,000,000
$5,456,000
$7,458,000
$14,114,000
Support work supplied by MR (Number of
requisitions)
0
25%
40%
35%
100%
Support work
supplied by US (Power costs)
10%
0
30%
60%
100%
Questions:
1. Allocate the two support departments’ costs to the two operating departments using the following methods:
a.Direct method.
b. Step-down method (allocate MR first).
c. Step-down method (allocate US first)
d. The Algebraic.
Answer quickly
Organic Laboratories allocates research and development costs to its three research facilities based on each facility's total annual revenue from new product developments:
Facility location
Kentucky
Arizona
Illinois
Total
New product revenue
$
57,792,000
$
100,400,000
$
82,608,000
$
240,800,000
Research & Development
$
60,400,000
Using revenue as an allocation base, the amount of costs allocated to the Kentucky research facility is calculated to be:
Chapter 15 Solutions
Horngren's Cost Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (16th Edition)
Ch. 15 - Prob. 15.1QCh. 15 - Describe how the dual-rate method is useful to...Ch. 15 - How do budgeted cost rates motivate the...Ch. 15 - Give examples of allocation bases used to allocate...Ch. 15 - Why might a manager prefer that budgeted rather...Ch. 15 - To ensure unbiased cost allocations, fixed costs...Ch. 15 - Prob. 15.7QCh. 15 - What is conceptually the most defensible method...Ch. 15 - Distinguish between two methods of allocating...Ch. 15 - What are the challenges of using the incremental...
Ch. 15 - Prob. 15.11QCh. 15 - What is one key way to reduce cost-allocation...Ch. 15 - Describe how companies are increasingly facing...Ch. 15 - Distinguish between the stand-alone and the...Ch. 15 - Identify and discuss arguments that individual...Ch. 15 - Single-rate versus dual-rate methods, support...Ch. 15 - Single-rate method, budgeted versus actual costs...Ch. 15 - Dual-rate method, budgeted versus actual costs and...Ch. 15 - Support-department cost allocation; direct and...Ch. 15 - Support-department cost allocation, reciprocal...Ch. 15 - Direct and step-down allocation. E-books, an...Ch. 15 - Reciprocal cost allocation (continuation of...Ch. 15 - Allocation of common costs. Evan and Brett are...Ch. 15 - Allocation of common costs. Gordon Grimes, a...Ch. 15 - Revenue allocation, bundled products. Couture Corp...Ch. 15 - Allocation of common costs. Jim Dandy Auto Sales...Ch. 15 - Single-rate, dual-rate, and practical capacity...Ch. 15 - Prob. 15.28PCh. 15 - Fixed-cost allocation. Central University...Ch. 15 - Allocating costs of support departments; step-down...Ch. 15 - Support-department cost allocations;...Ch. 15 - Common costs. Tate Inc. and Booth Inc. are two...Ch. 15 - Prob. 15.33PCh. 15 - Support-department cost allocations;...Ch. 15 - Revenue allocation, bundled products. Boca Resorts...Ch. 15 - Support-department cost allocations; direct,...
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