Chapter IE, Problem 14IE

1.

To determine

In the step-down method of cost allocation, the service department costs are to be allocated in a particular sequence wherein those costs incurred in the service department, which is first in the sequence, will be allocated among those service departments that used the services of that service department. Similarly, the service departments which are next in the sequence are treated the same way and thus, the allocation among the departments is performed in this manner under the step-down method.

Total costs after allocation by using the step-down method, and predetermined overhead rates in machining and assembly.

2.

To determine

The direct method of allocating cost is the method of allocating the service department costs to the departments’ parts of the business. In the direct method of cost allocation, the costs of the service department are allocated to the production department but these costs are not allocated to the rest of the service departments.

Total costs after allocation by using the direct method, and predetermined overhead rates in machining and assembly.

3.

To determine

Cost allocation is a process of assigning or allocating indirect cost to each and every unit using a predetermined overhead rate. The predetermined overhead rate is determined by dividing the estimated total cost by the estimated activity base.

Plantwide overhead rate

4.

To determine

Cost allocation is a process of assigning or allocating indirect costs to each and every unit using a predetermined overhead rate. The predetermined overhead rate is determined by dividing the estimated total cost by the estimated activity base.

• The total overhead allocated by using the step-down method,
• The total overhead allocated by using the direct method,
• The total overhead allocated by using the plantwide rate.