Question

In: Accounting

Leader Company has two support departments (S1 and S2) and two producing departments (P1 and P2)....

  1. Leader Company has two support departments (S1 and S2) and two producing departments (P1 and P2). Estimated direct costs and percentages of services used by these departments are as follows:

Allocation of support departments

S1

S2

P1

P2

S1

             -

10%

40%

50%

S2

20%

-

50%

30%

Direct costs

£4,500

£8,000

£10,000

£15,000

        Required:

a.

Prepare a schedule allocating the support department costs to the producing departments using the direct allocation method.

b.

Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method.

  1. Describe the differences between support and producing departments. Give two examples of each.

Solutions

Expert Solution

1.

a
schedule allocating the support department costs to the producing departments using the direct allocation method.
Support Department Production Dept
Ratio Of allocation S1 S2 S1 S2
Primary distribution $            4,500 $         8,000 $          10,000 $          15,000
Distribution S1 04:05 $          -4,500 $             2,000 $             2,500
Distribution S2 05:03 $       -8,000 $             5,000 $             3,000
Total $                    -   $                 -   $        17,000 $        20,500
b
schedule allocating the support department costs to the producing departments using the sequential allocation method
Support Department Production Dept
Ratio Of allocation S1 S2 S1 S2
Primary distribution $            4,500 $         8,000 $          10,000 $          15,000
Distribution S2 02:05:03 $            1,600 $       -8,000 $             4,000 $             2,400
Distribution S1 04:05 $          -6,100 $             3,389 $             2,711
Total $                    -   $                 -   $        17,389 $        20,111

2. Production department are direct actual cost related to production of the product whereas support departments

are departmental indirect cost(not actual) which were incur to support the main production activity .

Examples of production departments: manufacturing department, raw material procument,processing of finished good

Examples of Support departments: Management ,accounting ,marketing,sales promotion


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