Logan Products has two production departments—assembly and finishing. These are supported by two service departments—sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Total Labor Hours Used by Departments Sourcing Operations Assembly Finishing Sourcing - 20,000 40,000 60,000 Operations 10,000 - 60,000 50,000 The costs incurred in the plant are as follows: Departments Departmental Costs Sourcing $ 174,000 Operations 220,000 Assembly 416,000 Finishing 261,000 Total $ 1,071,000 Required: Use four decimal places (e.g., 33.3333%) in your calculation of percentages. 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first), and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 9E: A manufacturing company has two service and two production departments. Human Resources and Machine...

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Item 3

Logan Products has two production departments—assembly and finishing. These are supported by two service departments—sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments.

	Total Labor Hours Used by Departments
Sourcing	Operations	Assembly	Finishing
Sourcing	-	20,000	40,000	60,000
Operations	10,000	-	60,000	50,000

The costs incurred in the plant are as follows:

Departments	Departmental Costs
Sourcing	$	174,000
Operations		220,000
Assembly		416,000
Finishing		261,000
Total	$	1,071,000

Required:

Use four decimal places (e.g., 33.3333%) in your calculation of percentages.

1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first), and (c) the reciprocal method?

2. What are the total costs in the production departments after allocation?

(For all requirements, do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)

Expert Solution

Step 1

Answer 1:

Part a:

Direct Method:

$R a t i o o f a p p o r t i o n m e n t o f s o u r c i n g d e p a r t m e n t s \cos t t o a s s e m b l y a n d f i n i s h i n g = 40000 : 60000 = 2 : 3 R a t i o o f a p p o r t i o n m e n t o f O p e r a t i o n s d e p a r t m e n t s \cos t t o a s s e m b l y a n d f i n i s h i n g = 60000 : 50000 = 6 : 5$

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