Under what conditions are the results from using the direct method of allocation the same as...

Under what conditions are the results from using the direct method of allocation the same as those from using the other two methods? why?

Solutions

Expert Solution

There are three methods of allocating costs

a) Direct Method: It allocates support costs only to Operating Departments and does not consider any interaction between Support Departments prior to allocation.

b) Step Dowm Method: It allocates support costs to other support departments and to operating departments but recognise only one-Way Interaction between Support Departments prior to allocation

c) Reciprocal Method: It allocates support department costs to operating as well as support departments by fullyrecognizing the mutual services provided among all support departments.

Under the follwing conditions, direct method of allocation of overheads provide same results as ofother methods:

1. No support department provide services to other support depratments.

2. No support departments provide services to each other mutually.

In the above mention cases there will be no need to allocate one support department's cost to the other support department, and the allocation of costs willfollow the direct method pattern even if other methods are used.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

2. Based on the results of the glucose test strips, under what reaction conditions did hydrolysis...

2. Based on the results of the glucose test strips, under what reaction conditions did hydrolysis of sucrose occur? 3. Based the results of the glucose test strips, under what reaction conditions hydrolysis of lactose occur? 4. What do the results of the glucose test strips suggest about the enzyme specificity of invertase and lactase?

Using the incremental B/C method for comparing mutually exclusive alternatives always results in the same economically...

Using the incremental B/C method for comparing mutually exclusive alternatives always results in the same economically preferred alternatives as using the PW method. True/False When selecting projects based on the payback period method, a project with a shorter payback period is generally preferred. True/False One of the shortcomings of using the discounted payback period to select alternatives is that a)it ignores all the cash flows beyond the payback period b)it gives more weight to the cash flows beyond the payback...

Allocation: Direct Method and Step down Method Please show work Required: 1) Allocate the personnel and...

Allocation: Direct Method and Step down Method Please show work Required: 1) Allocate the personnel and engineering costs to the production departments using the direct method 2) Allocate the personnel and engineering costs to the production departments using the step down method -company has Two production departments: processing assembly -company also has Two service departments: personnel engineering Company budget for August 2014 is: Service departments: Personnel: direct costs is 64,000 square feet 4,000 # of employees 30 Engineering: direct costs...

a) What is the advantages of using a wound-rotor type of induction motor? Under what conditions?...

a) What is the advantages of using a wound-rotor type of induction motor? Under what conditions? b) When starting a wound rotor induction motor, what is the supposed value of resistance of the slip-ring starter? c) What is the wound rotor method of speed control?

Under what conditions would a seller be willing to sell on consignment? Under what conditions would...

Under what conditions would a seller be willing to sell on consignment? Under what conditions would a seller be willing to sell on terms of cash before delivery? Lastly, Under what conditions would a buyer be comfortable with each of these two extreme terms of sale? (on consignment OR cash before delivery)

The Journey Company operates under a process cost system using the weighted average method. All direct...

The Journey Company operates under a process cost system using the weighted average method. All direct materials are added at the beginning of production in the department, and conversion costs are incurred evenly throughout production. Inspection occurs when production is 100% completed. Following are data for January. All unfinished work at the end of January is 30% completed. The beginning inventory is 80% completed. Beginning inventories Direct Materials $16,000 Conversion Costs 14,200 Costs added during current period Direct Materials $90,400...

How are bad debts accounted for under the direct write-off method? What are the disadvantages of...

How are bad debts accounted for under the direct write-off method? What are the disadvantages of this method?

1. When using the Indirect method or the direct method, net cash flows from operating activities...

1. When using the Indirect method or the direct method, net cash flows from operating activities will never be the same! True or False and please explain. 2. Please provide three examples of items you believe could be classified as extraordinary losses and tell me why.

What are the advantages of using the direct method of preparing a statement of cash flows...

What are the advantages of using the direct method of preparing a statement of cash flows over the indirect method? What types of businesses would use each? Why?

PREPARE A CASH FLOW USING THE DIRECT METHOD

DIRECT Method RichCorp Income Statement FYE 12/31/19 Revenues 445,000.00 Cost of Goods Sold (232,500.00) Operating Expenses (110,500.00) Interest Expense (6,000.00) Loss on sale of equipment (1,000.00) (350,000.00) Income before income taxes 95,000.00 Income tax expense (32,500.00) Net Income 62,500.00 COMPARATIVE BALANCE SHEET 12/31/2019 12/31/2018 Cash 27,000 18,500.00 Accounts Receivable 34,000 13,000.00 Inventory 27,000 - Prepaid Insurance 2,000 3,000.00 Land 22,500 35,000.00 Buildings 100,000 100,000.00 Equipment 96,500 34,000.00 309,000 203,500.00 Accumulated Depreciation, Buildings 10,500 5,500.00 Accumulated Depreciation, Equipment 14,000 5,000.00 Accounts...

Subjects