Analyze Milkrageous, Inc. Milkragcous, Inc., a large, private dairy products company, is determining cost allocations for performance evaluation purposes. Company bonuses are based on cost containment, so accurate costing numbers are imperative. The general managers (GMs) over the cheese and yogurt divisions are being evaluated. Support department costs include Janitorial ($150,700) and Maintenance ($300,200). The Janitorial costs remain relatively fixed from quarter to quarter. Maintenance costs, however, vary with respect to the number of service calls made each quarter. The joint cost of processing milk before the split-off point for yogurt and cheese is $755,000 for the quarter. Yogurt sells at higher margins than cheese (at split-off as well as after further processing), but is equally difficult to produce as cheese. a. Which support department allocation method (direct, sequential, or reciprocal services) should be used to allocate support department costs for the GMs’ performance evaluation? b. What cost driver would be best for allocating Janitorial costs? c. What cost driver would be best for allocating Maintenance costs? d. Should Janitorial and Maintenance costs be considered when evaluating the general managers over cheese and yogurt? e. What joint cost allocation method should be used for performance evaluation purposes? f. Regardless of the correct answer to part (e), use the physical units method to allocate joint costs to yogurt and cheese assuming 198,000 pounds of yogurt and 102,000 pounds of cheese were produced during the quarter.

BuyFind

Managerial Accounting

15th Edition
Carl Warren + 1 other
Publisher: South-Western College Pub
ISBN: 9781337912020
BuyFind

Managerial Accounting

15th Edition
Carl Warren + 1 other
Publisher: South-Western College Pub
ISBN: 9781337912020

Solutions

Chapter
Section
Chapter 5, Problem 1MAD
Textbook Problem

Analyze Milkrageous, Inc.

Milkragcous, Inc., a large, private dairy products company, is determining cost allocations for performance evaluation purposes. Company bonuses are based on cost containment, so accurate costing numbers are imperative.

The general managers (GMs) over the cheese and yogurt divisions are being evaluated. Support department costs include Janitorial ($150,700) and Maintenance ($300,200). The Janitorial costs remain relatively fixed from quarter to quarter. Maintenance costs, however, vary with respect to the number of service calls made each quarter. The joint cost of processing milk before the split-off point for yogurt and cheese is $755,000 for the quarter. Yogurt sells at higher margins than cheese (at split-off as well as after further processing), but is equally difficult to produce as cheese.

  1. a. Which support department allocation method (direct, sequential, or reciprocal services) should be used to allocate support department costs for the GMs’ performance evaluation?
  2. b. What cost driver would be best for allocating Janitorial costs?
  3. c. What cost driver would be best for allocating Maintenance costs?
  4. d. Should Janitorial and Maintenance costs be considered when evaluating the general managers over cheese and yogurt?
  5. e. What joint cost allocation method should be used for performance evaluation purposes?
  6. f. Regardless of the correct answer to part (e), use the physical units method to allocate joint costs to yogurt and cheese assuming 198,000 pounds of yogurt and 102,000 pounds of cheese were produced during the quarter.

Expert Solution

Want to see the full answer?

Check out a sample textbook solution.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.

Chapter 5 Solutions

Managerial Accounting
Ch. 5 - Charlies Wood Works produces wood products (e.g.,...Ch. 5 - Bucknum Boys, Inc., produces hunting gear for buck...Ch. 5 - Brewster Toymakers Inc. produces toys for...Ch. 5 - Blakes Blacksmith Co. produces two types of...Ch. 5 - Garys Grooves Co. produces two types of carving...Ch. 5 - Man OFort Inc. produces two different styles of...Ch. 5 - Yo-Down Inc. produces yogurt. Information related...Ch. 5 - Snowy River Stallion Inc. produces horse and...Ch. 5 - Blue Africa Inc. produces laptops and desktop...Ch. 5 - Christmas Timber, Inc., produces Christmas trees....Ch. 5 - Crystal Scarves Co. produces winter scarves. The...Ch. 5 - Davis Snowflake Co. produces Christmas stockings...Ch. 5 - Becker Tabletops has two support departments...Ch. 5 - Becker Tabletops has two support departments...Ch. 5 - Becker Tabletops has two support departments...Ch. 5 - Support department cost allocation comparison...Ch. 5 - Board-It, Inc., produces the following types of 2 ...Ch. 5 - Carving Creations jointly produces wood chips and...Ch. 5 - Joint cost allocation market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Big Als Inc. produces and sells various cuts of...Ch. 5 - Gordons Smoothie Stand makes three types of...Ch. 5 - Joint cost allocation-market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Support department cost allocation Blue Mountain...Ch. 5 - Support activity cost allocation Jakes Gems mines...Ch. 5 - Joint cost allocation Lovely Lotion Inc. produces...Ch. 5 - Joint cost allocation Florissas Flowers jointly...Ch. 5 - Support department cost allocation Hooligan...Ch. 5 - Support activity cost allocation Kizzles Crepes...Ch. 5 - Joint cost allocation McKenzies Soap Sensations,...Ch. 5 - Joint cost allocation Rosies Roses produces three...Ch. 5 - Analyze Milkrageous, Inc. Milkragcous, Inc., a...Ch. 5 - Analyze Horsepower Hookup, Inc. Horsepower Hookup,...Ch. 5 - Analyze Joyous Julius, Inc. Joyous Julius, Inc.,...Ch. 5 - Analyze Williams Ball Jersey Shop Williams Ball ...Ch. 5 - Joint cost allocation and performance evaluation...Ch. 5 - Subjectivity in joint cost allocation Timpanogos...Ch. 5 - Logo Inc. has two data services departments...Ch. 5 - Adam Corporation manufactures computer tables and...Ch. 5 - Breegle Company produces three products (B-40,...Ch. 5 - Tucariz Company processes Duo into two joint...

Additional Business Textbook Solutions

Find more solutions based on key concepts
What is the objective of a transaction log?

Accounting Information Systems

Define the term margin of safety. Explain how it can be used as a crude measure of operating risk.

Managerial Accounting: The Cornerstone of Business Decision-Making

NPV Your division is considering two projects with the following cash flows (in millions): a. What are the proj...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why do economists make assumptions?

Principles of Macroeconomics (MindTap Course List)

Explain cause-related marketing

MKTG 12:STUDENT ED.-TEXT

What is inflation and what causes it?

Principles of Microeconomics (MindTap Course List)