Question

In: Accounting

The managers of Luckyprod Manufacturing are discussing ways to allocate the cost of service departments, such...

The managers of Luckyprod Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information:

Quality control Maintenance Machining Assembly Total
Budgeted overhead costs before allocation $350,000 $200,000 $400,000 $300,000 $1,250,000
Budgeted machine hours -- -- 50,000 -- 50,000
Budgeted direct labor hours -- -- -- 25,000 25,000
Budgeted hours of service
Quality control -- 7,000 21,000 7,000 35,000
Maintenance 10,000 -- 18,000 12,000 40,000

Requirements:

(28-1) If Luckyprod uses the direct method of allocating service department costs, calculate the total amount of overhead costs (including its own overhead costs) allocated to the assembly department. (3 points).

(28-2) If Luckyprod uses the step-down method of allocating service costs beginning with the support department with the highest amount of interdepartmental support service, calculate the total amount of overhead costs (including its own overhead costs) allocated to the assembly department. (5 points)

(28-3) If Luckyprod uses the reciprocal method of allocating service costs, calculate the total amount of overhead costs (including its own overhead costs) allocated to the assembly department. (7 points)

(28-4) Comment on your results in (28-1), (28-2), and (28-3). Discuss the differences, advantages, and disadvantages of the three methods. (6 points)

Solutions

Expert Solution

Solution:-

1. Direct method:

ekkarill92 answered 1 year ago
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