Concept explainers
Basis for cost allocation C1
In each blank next the following types of indirect expenses and service department expenses, place the identifying letter of the best allocation basis to use to distribute it to the departments indicated.
_______ 1. Computer service expenses of production
A. Relative for operating departments.
Scheduling for operating departments.
_______ 2.General office departments.expenses of the operating departments.
B. Proportion of total time in each department for maintenance.
______3.Maintenance department expenses of the operating departments.
C.Proportion of floor space occupied by each department
_____4. Electric utility expenses of all departments.
D. Proportion of total processing time for each operating department.
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Managerial Accounting
- (Appendix 4B) Sequential Method of Support Department Cost Allocation Refer to Exercise 4-51 for data. Now assume that Stevenson uses the sequential method to allocate support department costs to the operating divisions. General Factory is allocated first in the sequential method for the company. Required: 1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places.) 2. Allocate the support service costs to the operating divisions. (Note: Round all amounts to the nearest dollar.) 3. Assume divisional overhead rates are based on direct labor hours. Calculate the overhead rate for the Battery Division and for the Small Motors Division. (Note: Round overhead rates to the nearest cent.)arrow_forward(Appendix 4B) The method that assigns support department costs only to producing departments in proportion to each departments usage of the service is known as a. the sequential method. b. the proportional method. c. the reciprocal method. d. the direct method. e. None of these.arrow_forwardRefer to Cornerstone Exercise 7.3. Now assume that Valron Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential method. 2. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. (Round all allocated costs to the nearest dollar.) 3. What if the allocation ratios in Requirement 1 were rounded to six significant digits rather than four? How would that affect any rounding error in the allocation of costs?arrow_forward
- Refer to the data in Exercise 7.22. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the costs of the support departments using the sequential method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)arrow_forwardFIFO Method, Two-Department Analysis Refer to the data in Problem 6.38. Required: Prepare a production report for each department using the FIFO method.arrow_forwardCOMPUTING 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.arrow_forward
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- Describe the Source 01 the data for increasing Work in Process for (a) direct materials, (b) direct labor, and (c) factory overheadarrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.] The following information is departmental cost allocation with two service departments and two production departments. Percentage Service Provided to Department Cost S1 S2 P1 P2 Service 1 (S1) $ 47,000 0 % 20 % 40 % 40 % Service 2 (S2) 37,000 20 0 20 60 Production 1 (P1) 270,000 Production 2 (P2) 320,000 What is the total cost in P1 and P2 and what is the amount of service department cost allocated to P1 and P2 using the step method with S1 going first?arrow_forwardHow are overhead expenses allocated to particular departments? A. Strictly based on floor space B. Based on a ratio of space to sales volume C. Strictly based on sales volume D. By floor space or sales volume Please provide proper explanationarrow_forward
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