Question

In: Accounting

Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and...

Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded.

Supplying Department Using Department
Engineering Administration Maintenance Fabrication Assembly
Engineering 0 40 % 0 15 % 45 %
Administration 20 % 0 25 % 45 % 10 %
Maintenance 0 30 % 0 15 % 55 %
Direct cost $ 42,000 $ 248,550 $ 45,000 $ 230,000 $ 80,000


Required:

Allocate the service department costs to the two operating departments using the reciprocal method. (Matrix algebra is not required because there are only two service departments.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

Cost Allocation To:
From: Maintenance Personnel Printing Developing
Service department costs
Maintenance
Personnel
Total $0 $0 $0 $0

Solutions

Expert Solution

Answer:

The equations to calculate the values for administration, engineering and maintenance are as follows:

Administration = 248,550 + 40%*Engineering + 30%*Maintenance

Engineering = 42,000 + 20%*Administration

Maintenance = 45,000 + 25%*Administration

Now, we can substitute the equation for engineering and maintenance in the equation for administration, we get,

Administration = 248,550 + 40 %*( 42,000 + 20%*Administration) + 30%*(45,000 + 25%*Administration)

Solving equation, we get,

Administration = 248,550 + 16,800 + .08*Administration + 13,500 + .075*Administration

.845*Administration = 278,850

Administration = $330,000

Now, we can calculate the values for engineering and maintenance as follows:

Engineering = 42,000 + 20%*330,000 = $108,000

Maintenance = 45,000 + 25%*330,000 = $127,500

______

The cost allocation is given as below:

Costs

Fabrication

Assembly

Engineering

108,000

16,200 (108,000*15%)

48,600 (108,000*45%)

Administration

330,000

148,500 (330,000*45%)

33,000 (330,000*10%)

Maintenance

127,500

19,125 (127,500*15%)

63,750 (127,500*50%)

Total

$183,825

$145,350

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and...
Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded. Supplying Department Using Department Engineering Administration Maintenance Fabrication Assembly Engineering 0 40 % 0 15 % 45 % Administration 20 % 0 25 % 45 % 10 % Maintenance 0 30 % 0 15 % 55 % Direct cost $ 42,000 $ 248,550 $ 45,000 $ 230,000 $ 80,000 Required: Allocate...
Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and...
Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded. Supplying Department Using Department Engineering Administration Maintenance Fabrication Assembly Engineering 0 50 % 0 10 % 40 % Administration 10 % 0 20 % 50 % 20 % Maintenance 0 50 % 0 20 % 30 % Direct cost $ 24,000 $ 179,500 $ 25,000 $ 185,000 $ 50,000    Required:...
1.Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and...
1.Midland Resources has two production departments (Fabrication and Assembly) and three service departments (Engineering, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded: Supplying Department Using Department Engineering Administration Maintenance Fabrication Assembly Engineering 0 50 % 0 10 % 40 % Administration 10 % 0 20 % 50 % 20 % Maintenance 0 20 % 0 20 % 60 % Direct cost $ 22,000 $ 193,300 $ 25,000 $ 180,000 $ 50,000    Required:...
Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and...
Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and packaging. Information for the three service departments is given below: Admin Maint Person Directly traced overhead $68,000 $46,000 $77,000 Square feet occupied 2,000 3,500 3,000 Number of employees 36 24 30 Maintenance hours 2,500 2,000 4,000 Information for the two production departments is given below: Assembly Packaging Directly traced overhead $167,060 $120,090 Square feet occupied 2,100 1,400 Number of employees 42 18 Maintenance hours...
Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and...
Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and packaging. Information for the three service departments is given below: Admin Maint Person Directly traced overhead $65,000 $33,000 $74,000 Square feet occupied 2,000 3,500 3,000 Number of employees 42 24 30 Maintenance hours 2,500 2,000 4,000 Information for the two production departments is given below: Assembly Packaging Directly traced overhead $167,030 $114,090 Square feet occupied 2,100 1,400 Number of employees 36 18 Maintenance hours...
Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and...
Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and packaging. Information for the three service departments is given below: Admin Maint Person Directly traced overhead $68,000 $46,000 $77,000 Square feet occupied 2,000 3,500 3,000 Number of employees 36 24 30 Maintenance hours 2,500 2,000 4,000 Information for the two production departments is given below: Assembly Packaging Directly traced overhead $167,060 $120,090 Square feet occupied 2,100 1,400 Number of employees 42 18 Maintenance hours...
The Buckaneer Clinic has two service departments (Human Resources and Information Resources) and two "production" departments...
The Buckaneer Clinic has two service departments (Human Resources and Information Resources) and two "production" departments (In-patient Treatment and Out-patient Treatment). The service departments service the "production" departments as well as each other, and studies have shown that Information Resources provides the greater amount of service. Which of the following allocations would occur if Buckaneer uses the direct method of cost allocation? Multiple Choice Information Resources cost would be allocated to In-patient Treatment. Information Resources cost would be allocated to...
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits...
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows. Administration Communications Facilities Deposits Loans Direct costs $ 210,000 $ 320,000 $ 253,000 $ 8,220,000 $ 4,600,000 Employee hours 20,500 34,000 21,000 480,000 365,000 Number of employees 9 15 7 230 160 Square footage occupied 5,100 13,300 5,800...
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits...
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows. Administration Communications Facilities Deposits Loans Direct costs $ 240,000 $ 330,000 $ 260,000 $ 7,890,000 $ 5,400,000 Employee hours 21,000 37,000 20,500 476,000 334,000 Number of employees 7 10 6 210 130 Square footage occupied 5,300 13,400 5,100...
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits...
State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows: Administration Communications Facilities Deposits Loans Direct costs $ 240,000 $ 300,000 $ 256,000 $ 8,170,000 $ 4,800,000 Employee hours 23,000 34,000 23,000 420,000 367,000 Number of employees 9 17 4 230 160 Square footage occupied 4,500 14,300 5,500...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT