Question

1. Becker Tabletops has two support departments ( Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows:

   Support Department		Cost Driver
   Janitorial Department		Square footage to be serviced
   Cafeteria Department		Number of employees

   	Janitorial Department	Cafeteria Department	Cutting Department	Assembly Department
   Department costs	$310,000	$169,000	$1,504,000	$680,000
   Square feet	50	5,000	1,000	4,000
   Number of employees	10	3	30	10

   Allocated the support department costs to the production departments using the direct method below.

   	Cutting Department		Assembly Department
   Janitorial Department cost allocation	$62,000		$248,000
   Cafeteria Department cost allocation	$126,750		$42,250

   Allocated the support department costs to the production departments using the reciprocal services method below.

   	Cutting Department		Assembly Department
   Janitorial Department cost allocation	$38,200		$152,800
   Cafeteria Department cost allocation	$216,000		$72,000

   Allocated the support department costs to the production departments and Cafeteria Department using the sequential method below.

   	Cafeteria Department		Cutting Department		Assembly Department
   Janitorial Department cost allocation	$155,000		$31,000		$124,000
   Cafeteria Department cost allocation			$243,000		$81,000

   Compare the total support department costs allocated to each production department under each cost allocation method.

   a. Which production department is allocated the most support department costs under the direct method?

   		Cost
   Assembly Department Assembly Department Cutting Department		$

   b. Which production department is allocated the most support department costs under the sequential method?

   		Cost
   Cutting Department Assembly Department Cutting Department		$

   c. Which production department is allocated the most support department costs under the reciprocal services method?

   		Cost
   Cutting Department Assembly Department Cutting Department		$

   Feedback

Answer 1

Answer:

Generally, the questions mentions the various costs and cost drivers which are necessary for allocation to be solved but in this question already the allocation of costs to the concerned department (Production department in this case) has been given, hence we can arrive at the answers as required just by finding out which department has been allocated the highest cost.

a) Which production department is allocated the most support department costs under the direct method?

As given in question, under direct method:

Support Department Cost	Cutting Department	Assembly Department
Janitorial Department cost	$ 62,000	$ 248,000
Cafeteria Department cost	$ 126,750	$ 42,250
Total	$ 188,750	$ 290,250

Here the highest Support department cost ($ 290,250) has been allocated to the assembly department under direct method.

----------------------------------------------------------------------------------------------------------------------------

b) Which production department is allocated the most support department costs under the sequential method?

Support Department Cost	Cutting Department	Assembly Department	Cafeteria Department
Janitorial Department cost	$ 31,000	$ 124,000	$ 155,000
Cafeteria Department cost	$ 243,000	$ 81,000	-
Total	$ 274,000	$ 205,000	$ 155,000

Here the highest Support department cost ($ 274,000) has been allocated to the Cutting department under Sequential method.

----------------------------------------------------------------------------------------------------------------------------

c) Which production department is allocated the most support department costs under the reciprocal services method?

Support Department Cost	Cutting Department	Assembly Department
Janitorial Department cost	$ 38,200	$ 152,800
Cafeteria Department cost	$ 216,000	$ 72,000
Total	$ 254,200	$ 224,800

Here the highest Support department cost ($ 254,200) has been allocated to the Cutting department under reciprocal services method.

----------------------------------------------------------------------------------------------------------------------------