Question

Barstow Manufacturing Company has two service departments — product design and engineering support, and two production departments — assembly and finishing. The distribution of each service department's efforts to the other departments is shown below:

FROM	TO
	Design			Support			Assembly			Finishing
Design	0	%		10	%		30	%		60	%
Support	20	%		0	%		45	%		35	%

The direct operating costs of the departments (including both variable and fixed costs) were as follows:

Design	$	140,000
Engineering Support	$	160,000
Assembly	$	550,000
Finishing	$	840,000

The total cost accumulated in the finishing department using the reciprocal method is(calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

• $1,890,000.

• $627,143.

• $682,551.

• $1,062,857.

• $1,007,449.

Answer 1

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Correct option is: e. $1,007,449
Workings:
	To
From	Design	Engineering Support	Assembly	Finishing
Department cost	$       1,40,000	$     1,60,000	$   5,50,000	$     8,40,000
Design	$     -1,75,510	$        17,551	$       52,653	$     1,05,306
Engineering Support	$           35,510	$   -1,77,551	$       79,898	$         62,143
Total Cost	$                     0	$                  0	$   6,82,551	$   10,07,449
Workings:
Let Total Design department cost be x and Engineering Support Department be y
x = 140000 + (20% * y)
y = 160000 + (10% * x)
By solving above:
y = 160000 + (10% * (140000 + (20% * y)))
y = $177551
also,
x = 140000 + (20% *177551)
x = $175510