Carica Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Materials Requisitions and Utility Services). For the last quarter of 2020, Carica’s cost records indicate the following: Materials Requisitions (MR) Utility Services (US) Machining Assembly Total Budgeted overhead costs before any inter- department cost allocations $200,000 $1,000,000 $5,456,000 $7,458,000 $14,114,000 Support work supplied by MR (Number of requisitions) 0 25% 40% 35% 100% Support work supplied by US (Power costs) 10% 0 30% 60% 100% Questions: Allocate the two support departments’ costs to the two operating departments using the following methods: a.Direct method. b. Step-down method (allocate MR first). c. Step-down method (allocate US first) d. The Algebraic 2. Compare and explain differences in the support-department costs allocated to each production and make 6 insight claims adequately supported by accurate, & relevant evidence while making reference to Question 1. 3. What 4 approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? Make references to Question 1 when possible
Carica Company is a manufacturer with two production departments (Machining and Assembly) as well as two support departments (Materials Requisitions and Utility Services).
For the last quarter of 2020, Carica’s cost records indicate the following:
|
|
Materials Requisitions (MR) |
Utility Services (US) |
Machining |
Assembly |
Total |
|
Budgeted overhead costs before any inter- department cost allocations |
$200,000 |
$1,000,000 |
$5,456,000 |
$7,458,000 |
$14,114,000 |
|
Support work supplied by MR (Number of requisitions) |
0 |
25% |
40% |
35% |
100% |
|
Support work supplied by US (Power costs) |
10% |
0 |
30% |
60% |
100% |
Questions:
- Allocate the two support departments’ costs to the two operating departments using the following methods:
a.Direct method.
b. Step-down method (allocate MR first).
c. Step-down method (allocate US first)
d. The Algebraic
2. Compare and explain differences in the support-department costs allocated to each production and make 6 insight claims adequately supported by accurate, & relevant evidence while making reference to Question 1.
3. What 4 approaches might be used to decide the sequence in which to allocate support departments when using the step-down method? Make references to Question 1 when possible
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