Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 5, Problem 2E
To determine
Compute the costs from Support Department 1 that should be allocated to support department 2 and each production department.
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Virgin River Inc. produces horse and rancher equipment. Costs from Support Department 1 are allocated based on the number
of employees. Costs from Support Department 2 are allocated based on asset value. Relevant department information is
provided in the following table. Using the sequential method of support department cost allocation, determine the total costs
from Support Department 1 (assuming they are allocated first) that should be allocated to Support Department 2 and to each of
the production departments.
Support
Department 1 Department 2
Support
Production
Production
Department 1 Department 2
Number of employees
9.
7
25
18
Asset value
$1,150
$670
$6,230
$5,100
Department cost
$20,000
$15,500
$99,000
$79,000
Valron Company has two support departments, Human Resources and GeneralFactory, and two producing departments, Fabricating and Assembly.The costs of the Human Resources Department are allocated on the basis of numberof employees, and the costs of General Factory are allocated on the basis of squarefootage. Valron Company uses the direct method of support department costallocation.Required:1. Calculate the allocation ratios for the four departments using the directmethod.2. Using the direct method, allocate the costs of the Human Resources andGeneral Factory departments to the Fabricating and Assembly departments.3. What if the General Factory Department had 40 employees? How would thataffect the allocation of Human Resources Department costs to the Fabricatingand Assembly departments?
An activity based costing system is used at Haldeman, SA to assign products overhead costs. First, the two overhead costs of Equipment depreciation and Water expense are allocated to three activity cost pools - Handling, Machining, and Other - based on resource consumption. The information used to perform these allocations is below:
Overhead Costs:
Equipment depreciation: $50,000
Water expense: $60,000
Distribution of Resource Consumption across Activity Cost Pools:
Overhead Cost
Activity Cost Pools
Handling
Machining
Other
Equipment depreciation
0.28
0.34
0.38
Water expense
0.32
0.22
0.46
The second stage of allocation is done by assigning the Handling costs to products on the basis of orders filled while products are assigned Machining costs based on machine hours. Costs assigned to the Other activity pool are not further assigned to products. Activity information for Haldeman's only two products is below:
orders filled
machine hours
Product LS-157:
3,400
3,400…
Chapter 5 Solutions
Managerial Accounting
Ch. 5 - Why are support department costs difficult to...Ch. 5 - Why does support department cost allocation matter...Ch. 5 - What are some drawbacks of applying support...Ch. 5 - Why is the diect method of support department cost...Ch. 5 - How does management determine the order in which...Ch. 5 - Are large or small companies more likely to use...Ch. 5 - What is the main difference between the physical...Ch. 5 - When would management most likely use the net...Ch. 5 - What are the two most often used ways of...Ch. 5 - How can support department and joint cost...
Ch. 5 - Charlies Wood Works produces wood products (e.g.,...Ch. 5 - Bucknum Boys, Inc., produces hunting gear for buck...Ch. 5 - Prob. 3BECh. 5 - Blakes Blacksmith Co. produces two types of...Ch. 5 - Garys Grooves Co. produces two types of carving...Ch. 5 - Prob. 6BECh. 5 - Yo-Down Inc. produces yogurt. Information related...Ch. 5 - Prob. 2ECh. 5 - Blue Africa Inc. produces laptops and desktop...Ch. 5 - Christmas Timber, Inc., produces Christmas trees....Ch. 5 - Crystal Scarves Co. produces winter scarves. The...Ch. 5 - Davis Snowflake Co. produces Christmas stockings...Ch. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Support department cost allocation comparison...Ch. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Joint cost allocation market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Joint cost allocation-market value at split-off...Ch. 5 - Joint cost allocation net realizable value method...Ch. 5 - Support department cost allocation Blue Mountain...Ch. 5 - Support activity cost allocation Jakes Gems mines...Ch. 5 - Joint cost allocation Lovely Lotion Inc. produces...Ch. 5 - Joint cost allocation Florissas Flowers jointly...Ch. 5 - Support department cost allocation Hooligan...Ch. 5 - Support activity cost allocation Kizzles Crepes...Ch. 5 - Joint cost allocation McKenzies Soap Sensations,...Ch. 5 - Prob. 4PBCh. 5 - Analyze Milkrageous, Inc. Milkragcous, Inc., a...Ch. 5 - Analyze Horsepower Hookup, Inc. Horsepower Hookup,...Ch. 5 - Prob. 3MADCh. 5 - Prob. 4MADCh. 5 - Joint cost allocation and performance evaluation...Ch. 5 - Prob. 3TIFCh. 5 - Prob. 1CMACh. 5 - Adam Corporation manufactures computer tables and...Ch. 5 - Breegle Company produces three products (B-40,...Ch. 5 - Tucariz Company processes Duo into two joint...
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