Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 7, Problem 24E
Refer to the data in Exercise 7.22. The support departments are ranked in order of highest cost to lowest cost.
Required:
- 1. Allocate the costs of the support departments using the sequential method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.)
- 2. Using direct labor hours, compute departmental
overhead rates. (Round to the nearest cent.)
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Check out a sample textbook solutionStudents have asked these similar questions
1. Logo Inc. has two data services departments (Systems and Facilities) that provide support to the
company's three production departments (Machining, Assembly, and Finishing). The overhead
costs of the Systems Department are allocated to other departments on the basis of computer
usage hours. The overhead costs of the Facilities Department are allocated based on square
feet occupied (in thousands). Other information pertaining to Logo is as follows.
Department Overhead Computer Usage Hours Square Feet Occupied
Systems
Facilities
$200,000
300
1,000
100,000
900
600
Machining
Assembly
Finishing
Totals
400,000
3,600
2,000
550,000
1,800
3,000
620,000
2,700
5,000
9,300
11,600
AI Rawabi company consist of two support departments (Administration and R& D) and two operating departments
(Manufacturing & Assembling). The cost of Administration department is allocated based on number of employees and the cost
of R& D department is allocated based on research hours. The table below shows the cost details. Allocate the cost of the
support departments to the operating departments using step-down method. How much is the Assembling department total
cost after cost allocation:
Support Departments
Operating Departments
R&D Manufacturing Assembling Total Cost
Admin
Cost:
Salaries
30000
60000
44000
70000
204000
Supplies
10000
30000
25000
30000
95000
Total
40000
90000
69000
100000
299000
Allocation Base:
Research Hours
200
300
450
250
Number of Employees
7
10
9
13
Select one:
O a. RO 155775
O b. RO 162090.3
O c. RO 143225
O d. 136909.7
1. Determine the total estimated overhead cost for each of the producing departments after allocating the cost of the service department.
A. Using employee headcount as the allocation base.
B. Using occupied space as the allocation base.
C. Using productive capacity as the allocation base.
D. Using the 3-year average use as the allocation base.
Chapter 7 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 7 - Describe the two-stage allocation process for...Ch. 7 - Why must support service costs be assigned to...Ch. 7 - Explain how allocation of support service costs is...Ch. 7 - Prob. 4DQCh. 7 - Explain how allocating support service costs will...Ch. 7 - Prob. 6DQCh. 7 - Explain why it is better to allocate budgeted...Ch. 7 - Why is it desirable to allocate variable costs and...Ch. 7 - Explain why either normal or peak capacity of the...Ch. 7 - Explain why variable bases should not be used to...
Ch. 7 - Prob. 11DQCh. 7 - Explain the difference between the direct method...Ch. 7 - The reciprocal method of allocation is more...Ch. 7 - What is a joint cost? How does it relate to...Ch. 7 - How do joint costs differ from other common costs?Ch. 7 - The expected costs for the Maintenance Department...Ch. 7 - Prob. 2CECh. 7 - Valron Company has two support departments, Human...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3 and solve for...Ch. 7 - Orchard Fresh, Inc., purchases apples from local...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - A company manufactures three products, L-Ten,...Ch. 7 - Refer to Cornerstone Exercise 7.10. (Round...Ch. 7 - Classify each of the following departments in a...Ch. 7 - Prob. 13ECh. 7 - Identify some possible causal factors for the...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Kumar, Inc., evaluates managers of producing...Ch. 7 - Refer to the data in Exercise 7.18. When the...Ch. 7 - Jasmine Company manufactures both pesticide and...Ch. 7 - Refer to the data in Exercise 7.20. The company...Ch. 7 - Eilers Company has two producing departments and...Ch. 7 - Refer to the data in Exercise 7.22. The company...Ch. 7 - Refer to the data in Exercise 7.22. The support...Ch. 7 - Alomar Company manufactures four products from a...Ch. 7 - Refer to Exercise 7.25 and allocate the joint...Ch. 7 - Pacheco, Inc., produces two products, overs and...Ch. 7 - Minor Co. has a job order cost system and applies...Ch. 7 - A CPA would recommend changing from plantwide...Ch. 7 - A company uses charging rates to allocate service...Ch. 7 - Chester Company provided information on overhead...Ch. 7 - Which of the following statements is true? a. The...Ch. 7 - Biotechtron, Inc., has two research laboratories...Ch. 7 - AirBorne is a small airline operating out of...Ch. 7 - Duweynie Pottery, Inc., is divided into two...Ch. 7 - Macalister Corporation is developing departmental...Ch. 7 - Prob. 37PCh. 7 - Welcome Inns is a chain of motels serving business...Ch. 7 - Sonimad Sawmill, Inc. (SSI), purchases logs from...Ch. 7 - Prob. 40P
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