Question

In: Accounting

Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...

Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $251,000, $418,000, and $207,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs to the two production departments and compute the unit costs.

The company decided that Administration costs should be allocated on the basis of square footage used by each production and service department. Accounting costs are allocated on the basis of number of employees. Maintenance costs are allocated on the basis of the dollar value of the equipment in each department. The use of each base by all departments during the current period follows:  
  

Used by
Allocation Base Administration Accounting Maintenance Molding Painting
Building area 15,000 29,500 41,300 442,500 76,700
Employees 66 15 22 44 88
Equipment value (in thousands) $ 56.00 $ 168.00 $ 15.50 $ 224.00 $ 112.00

      
Direct costs of the Molding Department included $232,500 in direct materials, $342,500 in direct labor, and $115,000 in overhead. The Painting Department’s direct costs consisted of $237,000 in direct materials, $163,000 in direct labor, and $70,000 in overhead.

  
Required:

a. Using the step method, determine the allocated costs and the total costs in each of the two producing departments. Ignore self-usage (for example, ignore work done by Administration for itself). Rank order the allocation as follows: (1) Maintenance, (2) Accounting, and (3) Administration. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)

b. Assume that 100,000 units were processed through these two departments. What is the unit cost for the sum of direct materials, direct labor, and overhead (1) for Molding, (2) for Painting, and (3) in total? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

c.

(1) Compute the cost per unit for the service department costs allocated to the production departments. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Solutions

Expert Solution

a. Step method
Administration Accounting Maintenance Molding Painting
Direct costs 251000 418000 207000 690000 470000
(232500+342500+115000) (237000+163000+70000)
Allocated from
Administration -251000 12550 17570 188250 32630
(at 29500:41300:442500:76700) 251000*(29500/590000) 251000*(41300/590000) 251000*(442500/590000) 251000*(76700/590000)
Accounting -430550 61507 123014 246029
(at 22:44:88) 430550*(22/154) 430550*(44/154) 430550*(88/154)
Maintenance -286077 190718 95359
(at 224:112) 286077*(224/336) 286077*(112/336)
Total 0 0 0 1191982 844018
b. Unit cost
Molding Painting
Direct material 232500 237000
Direct labor 342500 163000
Overhead 115000 70000
Total 690000 470000
Units produced 100000 100000
Cost per unit 6.90 4.70
c. Molding Painting
Administration 188250 32630
Accounting 123014 246029
Maintenance 190718 95359
Total 501982 374018
Units produced 100000 100000
Cost per unit 5.02 3.74

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $233,000, $386,000, and $193,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $266,000, $381,000, and $209,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $251,000, $418,000, and $207,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $255,000, $405,000, and $217,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs...
Betty DeRose, Inc. operates two production departments, molding and assembly, and two service departments, repair and...
Betty DeRose, Inc. operates two production departments, molding and assembly, and two service departments, repair and power. Service department costs are allocated to production departments using a reciprocal two-stage allocation method. Repair department costs are allocated on the basis of repair hours and power department costs are allocated on the basis of kilowatt hours. In the second stage, departmental overhead rates for the two production departments are calculated using direct labor hours as the activity for each department. Information for...
Problem 11-54 (Algo) Step Method with Three Service Departments (LO 11-3) Model, Inc., produces model automobiles...
Problem 11-54 (Algo) Step Method with Three Service Departments (LO 11-3) Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $262,000, $392,000, and $189,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit...
Problem 11-48 Step Method with Three Service Depagrtments (LO 11-3) Model, Inc., produces model automobiles made...
Problem 11-48 Step Method with Three Service Depagrtments (LO 11-3) Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $255,000, $416,000, and $191,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on...
Plastic​ Molding, Inc. manufacturers plastic molding for automobiles.​ It’s costing system utilizes two cost​ categories, direct...
Plastic​ Molding, Inc. manufacturers plastic molding for automobiles.​ It’s costing system utilizes two cost​ categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of production and conversion costs are allocated evenly throughout​ production: Data for the Assembly Department for March 2007​ are: ​Work-in-Process, beginning​ inventory, 60% converted ​ 400 units Units started during March ​ 2,000 units ​Work-in-Process, ending​ inventory, 40% converted ​ 200...
MegaSports, Inc. produces two high-priced metal baseball bats, the Slugger and the Launcher, that are made...
MegaSports, Inc. produces two high-priced metal baseball bats, the Slugger and the Launcher, that are made from special aluminum and steel alloys. The cost to produce a Slugger bat is $100, and the cost to produce a Launcher bat is $120. We cannot assume that MegaSports will sell all the bats it can produce. As the selling price of each bat model—Slugger and Launcher—increases, the quantity demanded for each model goes down. ​ Assume that the demand, S, for Slugger...
ABC Company operates two service departments, quality control and maintenance, and two production departments, cutting and...
ABC Company operates two service departments, quality control and maintenance, and two production departments, cutting and finishing. Service department costs are allocated to production departments using a sequential two-stage allocation method. Quality control department costs are allocated on the basis of number of inspections and maintenance department costs are allocated on the basis of machine hours. In the second stage, departmental overhead rates for the two production departments are calculated using direct labor hours as the activity for each department....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT