The following matrix, illustrates each support department’s cost and how it spends its time: Support Department...

The following matrix, illustrates each support department’s cost and how it spends its time:

	Support Department
User of Support Service	Personnel	Accounting & Administration	Marketing	Fleet Operations
Personnel		5%
Accounting & Administration	5%			8%
Marketing	10%	10%
Fleet Operations	5%	10%

Gardening Center	15%	25%	40%	7%
Landscaping	25%	30%	30%	40%
Lawn Care	40%	20%	30%	45%

TOTAL COST	$50,000	$80,000	$240,000	$200,000

Using the step-down method of support department cost allocation, determine the total support cost allocated to each operating department. Allocate costs in the following order: A&A, Personnel, Fleet Operations, Marketing.

Explain why the order of allocation given in part 1, above, may have been chosen.

Expert Solution

	A&A	Personnel	Fleet Operations	Marketing	Gardening Center	Landscaping	Lawn Care	Total
	$ 80,000	$ 50,000	$ 2,00,000	$ 2,40,000	$ -	$ -	$ -	$ 5,70,000
Allocation of A&A costs in the ratio of 5:10:10:25:30:20	$ -80,000	$ 4,000	$ 8,000	$ 8,000	$ 20,000	$ 24,000	$ 16,000	$ -
Total costs	$ -	$ 54,000	$ 2,08,000	$ 2,48,000	$ 20,000	$ 24,000	$ 16,000
Allocation of Personnel costs in the ratio of 5/10/15/25/40	$ -	$ -54,000	$ 2,842	$ 5,684	$ 8,526	$ 14,211	$ 22,737	$ -
Total costs	$ -	$ -	$ 2,10,842	$ 2,53,684	$ 28,526	$ 38,211	$ 38,737
Allocation of Fleet operations cost in the ratio of 7/40/45	$ -	$ -	$ -2,10,842	$ -	$ 16,042	$ 91,671	$ 1,03,129	$ -0
Total costs	$ -	$ -	$ -	$ 2,53,684	$ 44,568	$ 1,29,882	$ 1,41,866
Allocation of marketing costs in the ratio of 4/3/3				$ -2,53,684	$ 1,01,474	$ 76,105	$ 76,105	$ -
Final allocated costs	$ -	$ -	$ -	$ -	$ 1,46,042	$ 2,05,987	$ 2,17,971	$ 5,70,000
Explanation for choosing the order of allocation:
The department rendering service to the maximum number of other departments is to be chosen. Hence, the order would be:
Personnel and A&A-Rank 1 as they do service to 6 departments.
But, as A&A has higher cost at $80000 it will be given Rank 1 and Personnel Rank 2.
Then fleet operations (4 departments) and finally marketing (3 departments).

jeff jeffy answered 2 years ago

ABC Corporation has three support departments with the following costs and cost drivers: Support Department Cost...

ABC Corporation has three support departments with the following costs and cost drivers: Support Department Cost Cost Driver Graphics Production $200,000 number of copies made Accounting 500,000 number of invoices processed Personnel 400,000 number of employees ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: Micro Macro Super Revenues $700,000 $850,000 $650,000 Direct operating expenses 50,000 70,000 100,000 Number of copies made 20,000 30,000 50,000 Number of invoices processed 700 800...

. You are required to allocate the support department cost to operations department by taking any...

. You are required to allocate the support department cost to operations department by taking any Saudi based operating company

Support Department and Joint Cost Allocation All firms have support or service departments to support production...

Support Department and Joint Cost Allocation All firms have support or service departments to support production activities. As addressed in earlier modules, those costs must be allocated to product costs. Sometimes a single manufacturing process produces an output that can then be further manufactured into several other products. The costs of the initial manufacturing process must be allocated to the subsequent products. Module 06: Critical Thinking Assignment CRITICAL THINKING ASSIGNMENT Complete the following three questions using Microsoft Excel. No other...

Corporation is conducting a time-driven activity-based costing study in its Tech Support Department. The company has...

Corporation is conducting a time-driven activity-based costing study in its Tech Support Department. The company has provided the following data to aid in that study: Jahnel Corporation Tech Support Department Data Inputs Resource Data: Number of employees 7 Average salary per employee $ 43,200 Weeks of employment per year 50 Minutes available per week (40 hours × 60 minutes) 2,400 Practical capacity percentage 90 % Activity Data: Routing Calls Resolving Problems Preparing Change Orders Minutes per unit of the activity...

Cieslinski Corporation is conducting a time-driven activity-based costing study in its Tech Support Department. The company...

Cieslinski Corporation is conducting a time-driven activity-based costing study in its Tech Support Department. The company has provided the following data to aid in that study: Cieslinski Corporation Tech Support Department Data Inputs Resource Data: Number of employees 12 Average salary per employee $ 43,200 Weeks of employment per year 50 Minutes available per week (40 hours × 60 minutes) 2,400 Practical capacity percentage 80 % Activity Data: Routing Calls Resolving Problems Preparing Change Orders Minutes per unit of the...

An aircraft repair service reimburses its customers for the time that an aircraft spends at their...

An aircraft repair service reimburses its customers for the time that an aircraft spends at their facility. Total costs are the sum of these reimbursements (waiting costs) and the salaries of their technicians. A customer is reimbursed $203 per hour for the time that the aircraft is out of service, and the cost of a service technician (including equipment and materials) is $1,196 per hour. Use Table 1 and Table 2. a. How many service technicians should be on call,...

The amount of time a bank teller spends with each customer has a population mean of...

The amount of time a bank teller spends with each customer has a population mean of 3.086 minutes. You select a random sample of 16 customers. The sample standard deviation is 0.40 minutes. There is a 95% chance that the sample mean is below ______ minutes

Describe the relationship between a star’s mass and the time a planet spends in its CHZ....

Describe the relationship between a star’s mass and the time a planet spends in its CHZ. What kind of star is the better candidate in terms of one of its planets being able to spend the maximum amount of time in the CHZ – a low-mass star, or a high-mass star? Explain.

Blueprint Problem: Support Department Cost Allocation The Difference Between Support Departments and Producing Departments When a...

Blueprint Problem: Support Department Cost Allocation The Difference Between Support Departments and Producing Departments When a firm decides that a plant wide overhead rate is not sufficient (perhaps it makes multiple products and the various products go through some processes but not all), it may decide to departmentalise. The factory is divided into departments and costs are accumulated within the departments. When that is done, there are basically two types of departments: producing departments that actually make units of product,...

This problem illustrates how costs of two corporate support departments are allocated to operating divisions using...

This problem illustrates how costs of two corporate support departments are allocated to operating divisions using a dual-rate method. Fixed costs are allocated using budgeted costs and budgeted hours used by other departments. Variable costs are allocated using actual costs and actual hours used by other departments. Seth Gross Horizons budgets the following amounts for its two central corporate support departments (legal and personnel) in supporting each other and the two manufacturing divisions, the Laptop Division (LTD) and the Work...

Question