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	%		20	%		70	%
Support	20	%		0	%		40	%		40	%

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

Design	$	140,000
Engineering Support	$	360,000
Assembly	$	520,000
Finishing	$	750,000

The total cost accumulated in the assembly 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):

• $1,936,633.

• $660,510.

• $715,918.

• $1,109,490.

• $1,054,082.

Answer 1

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Correct option is: c. $715,918
Workings:
	To
From	Design	Engineering Support	Assembly	Finishing
Department cost	$       1,40,000	$     3,60,000	$   5,20,000	$     7,50,000
Design	$     -2,16,327	$        21,633	$       43,265	$     1,51,429
Engineering Support	$           76,327	$   -3,81,633	$   1,52,653	$     1,52,653
Total Cost	$ 0	$ 0	$   7,15,919	$   10,54,082
Workings:
Let Total Design department cost be x and Engineering Support Department be y
x = 140000 + (20% * y)
y = 360000 + (10% * x)
By solving above:
y =360000 + (10% * (140000 + (20% * y)))
y = $381633
also,
x = 140000 + (20% *381633)
x = $216327