Question

Barstow Manufacturing Company has two service departments — product design and engineering support, and two production departments — assembly and finishing. The distribution of each service department's efforts to the other departments is shown below: FROM TO Design Support Assembly Finishing Design 0% 20% 20% 60% Support 10% 0% 30% 60% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Design$120,000 Engineering Support$180,000 Assembly$530,000 Finishing$740,000

The total cost accumulated in the finishing department using the reciprocal method is?

(calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

$1,831,939.

$565,204.

$620,612

.$1,004,796.

$949,388.

Answer 1

D. $ 949,388

Calculations:

Let the total cost of	Product design	be x.
Let the total cost of	Engineering Support	be y.

So,

So, x = 120,000 + 0.1y	---------Equation 1
y = 180,000 + 0.2x	---------Equation 2

Now

Solving Equation 1 and 2:

Substitute value of 'y' from equation 2 in Equation 1-

So, x = 120000 + 0.1 (180000 + 0.2x)

So, x = $ 140816.32

The total cost of Product design is $ 140816.32

Also,

Putting the value of x in equation 2-

So, y = 180000 + 0.2 * 140816.32

So, y = $ 208163.26

The total cost of Engineering Support is $ 208163.26

Finally,

	Assembly	Finishing	Product design	Engineering Support
Total cost	$ 530,000.00	$ 740,000.00	$   120,000.00	$             180,000.00
Product design	$    28,163.27	$    84,489.80	$ (140,816.33)	$                28,163.27
Total cost	$ 558,163.27	$ 824,489.80	$    (20,816.33)	$             208,163.27
Engineering Support	$    62,448.98	$ 124,897.96	$     20,816.33	$            (208,163.27)
Total cost	$ 620,612.24	$ 949,387.76	$                    -	$                              -

Clearly, option d is correct and other options are incorrect.