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Marin Company produces two software products (Cloud-X and Cloud-Y) in two separate departments (A and B). These products are highly regarded network maintenance programs. Cloud-X is used for small networks and Cloud-Y is used for large networks. Marin is known for the quality of its products and its ability to meet dates promised for software upgrades.

Department A produces Cloud-X, and department B produces Cloud-Y. The production departments are supported by two support departments, systems design and programming services. The sources and uses of the support department time are summarized as follows:

From	To				Total Labor Hours
	Design	Programming	Department A	Department B
Design	-	5,000	1,000	9,000	15,000
Programming	400	-	600	1,000	2,000

The costs in the two service departments are as follows:

	Design				Programming
Labor and materials (all variable)	$	89,000			$	59,400
Depreciation and other fixed costs		63,400				4,000
Total	$	152,400			$	63,400

Required:

1. Determine the total support costs allocated to each of the producing departments using (a) the direct method, (b) the step method (design department goes first), and (c) the reciprocal method? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)

Required:

1. Determine the total support costs allocated to each of the producing departments using (a) the direct method, (b) the step method (design department goes first), and (c) the reciprocal method? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.

Answer 1

Direct method
Department	Design	Programming	Department A	Department B
Direct overhead	152,400	63,400	-	-
Allocated Design In Proportion of 1000 : 9000 respectively (1000+9000=10000) (For Department A = 152400*1000/10000)	(152,400)		15,240	137,160
Allocated Programming In Proportion of 600 : 1000 respectively (600+1000=1600) (For Department A = 63400*600/1600)		(63,400)	23,775	39,625
Total cost after departmental allocation using direct method	-	-	$            39,015	$          176,785
Step method
design department goes first
Department	Design	Programming	Department A	Department B
Direct overhead	152,400	63,400	-	-
Allocated Design In Proportion of 5000 : 1000 : 9000 respectively (5000+1000+9000=15000) (For Department A = 152400*1000/15000)	(152,400)	50,800	10,160	91,440
Total	-	114,200	10,160	91,440
Allocated Programming In Proportion of 600 : 1000 respectively (600+1000=1600) (For Department A = 114200*600/1600)		(114,200)	42,825	71,375
Total cost after departmental allocation using Step method	-	-	$            52,985	$          162,815
Reciprocal method
Department	Design	Programming	Department A	Department B
Direct overhead	152,400.00	63,400.00	-	-
Allocated Design In Proportion of 5000 : 1000 : 9000 respectively	(152,400.00)	50,800.00	10,160.00	91,440.00
Total	-	114,200.00	10,160.00	91,440.00
Allocated Programming In Proportion of 400 : 600 : 1000 respectively	22,840.00	(114,200.00)	34,260.00	57,100.00
Total	22,840.00	-	44,420.00	148,540.00
Allocated Design In Proportion of 5000 : 1000 : 9000 respectively	(22,840.00)	7,613.33	1,522.67	13,704.00
Total	-	7,613.33	45,942.67	162,244.00
Allocated Programming In Proportion of 400 : 600 : 1000 respectively	1,522.67	(7,613.33)	2,284.00	3,806.67
Total	1,522.67	-	48,226.67	166,050.67
Allocated Design In Proportion of 5000 : 1000 : 9000 respectively	(1,522.67)	507.56	101.51	913.60
Total	-	507.56	48,328.18	166,964.27
Allocated Programming In Proportion of 400 : 600 : 1000 respectively	101.51	(507.56)	152.27	253.78
Total	101.51	-	48,480.44	167,218.04
Allocated Design In Proportion of 5000 : 1000 : 9000 respectively	(101.51)	33.84	6.77	60.91
Total	-	33.84	48,487.21	167,278.95
Allocated Programming In Proportion of 400 : 600 : 1000 respectively	6.77	(33.84)	10.15	16.92
Total	6.77	-	48,497.36	167,295.87
Allocated Design In Proportion of 5000 : 1000 : 9000 respectively	(6.77)	2.26	0.45	4.06
Total	-	2.26	48,497.81	167,299.93
Allocated Programming In Proportion of 400 : 600 : 1000 respectively	0.45	(2.26)	0.68	1.13
Total cost after departmental allocation using Reciprocal method	-	-	$            48,498	$          167,301

we can stop the same process when the Balance left in service Departments become negligible.