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In: Accounting

Zeta Company budgets the following amounts for its Buildings & Grounds and Computer Services Departments in...

Zeta Company budgets the following amounts for its Buildings & Grounds and Computer Services Departments in servicing each other and the two manufacturing divisions of Signs and Mailers: ___________________Used By________________________________ Supplied By Building & Grounds Computer Services Signs Mailers Buildings & Grounds — 0.20 0.60 0.20 Computer Services 0.15 — 0.30 0.55 The actual results for the time period were as follows: ___________________Used By________________________________ Supplied By Building & Grounds Computer Services Signs Mailers Buildings & Grounds — 0.10 0.60 0.30 Computer Services 0.25 — 0.35 0.40 Actual cost data for each department are: Fixed Variable Buildings & Grounds $ 50,000 $90,000 Computer Services $100,000 $21,000 a. The equation to determine the total variable costs of Computer Services using the preferred allocation basis, for the reciprocal allocation method b. Total variable costs allocated from Computer Services to Mailers Department, using the preferred allocation basis, by the step-down allocation method (begin with Building & Grounds) c. Total fixed costs allocated from Buildings & Grounds to the Signs Department, using the preferred allocation basis, by the direct allocation method

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ANSWER:

(a)

Budgeted usages
Reciprocal Method Building & Grounds Computer Signs Mailers Total
Building & Grounds                      0.20                        0.60                0.20                1.00
Computer Services                             0.15                        0.30                0.55                1.00
Variable cost                   90,000.00            21,000.00 111,000.00
Let variable cost of Building & Grounds be B&G and variable cost of Computer Services be CS.
So, CS= 21000+ 0.20 of B&G

(b)

Budgeted usages
Step Down Method Building & Grounds Computer Signs Mailers Total
Building & Grounds                      0.20                        0.60                0.20                1.00
Variable cost                   90,000.00      90,000.00
Allocation                 (90,000.00)            18,000.00              54,000.00     18,000.00                    -  
Computer Services                             0.15                        0.30                0.55                1.00
Computer Services %                        0.35                0.65                1.00
Variable cost            21,000.00      21,000.00
Total Variable cost            39,000.00
Allocation          (39,000.00)              13,764.71     25,235.29                    -  
So answer is $ 25,235.

(c)

Direct Method Building & Grounds Computer Signs Mailers Total
Building & Grounds                      0.20                        0.60                0.20                1.00
Building & Grounds %                        0.75                0.25                1.00
Fixed cost                   50,000.00      50,000.00
Allocation                 (50,000.00)              37,500.00     12,500.00                    -  
So answer is $ 37,500.

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