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    ACCTG 201 Support Department Cost Allocation 1

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    Jessa Yu
    The document describes a cost accounting problem involving the allocation of service department costs to production departments. It provides information on the direct costs and service hours used by two service departments (Maintenance and Engineering) and three production departments (Departments A, B, and C). It then asks to calculate the total costs of each department after allocating the service department costs using different methods. A second similar problem is presented involving service departments A and B and production departments X and Y.

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    ACCTG 201 Support Department Cost Allocation 1

    Uploaded by

    Jessa Yu
    127 views1 page
    The document describes a cost accounting problem involving the allocation of service department costs to production departments. It provides information on the direct costs and service hours used by two service departments (Maintenance and Engineering) and three production departments (Departments A, B, and C). It then asks to calculate the total costs of each department after allocating the service department costs using different methods. A second similar problem is presented involving service departments A and B and production departments X and Y.

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    The document describes a cost accounting problem involving the allocation of service department costs to production departments. It provides information on the direct costs and service hours used by two service departments (Maintenance and Engineering) and three production departments (Departments A, B, and C). It then asks to calculate the total costs of each department after allocating the service department costs using different methods. A second similar problem is presented involving service departments A and B and production departments X and Y.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    127 views1 page

    ACCTG 201 Support Department Cost Allocation 1

    Uploaded by

    Jessa Yu
    The document describes a cost accounting problem involving the allocation of service department costs to production departments. It provides information on the direct costs and service hours used by two service departments (Maintenance and Engineering) and three production departments (Departments A, B, and C). It then asks to calculate the total costs of each department after allocating the service department costs using different methods. A second similar problem is presented involving service departments A and B and production departments X and Y.

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    ACCTG 201 – COST ACCOUNTING

    Support Department Cost Allocation

    Problem 1

    GUENNEVERE Company has two service departments and three production departments, each
    producing a separate product. For a number of years, GUENNEVERE has allocated the costs of the
    service departments to the production departments on the basis of the annual sales dollars. In a recent
    audit report, the internal auditor stated that the distribution of service department costs on the basis of
    annual sales dollars would lead to serious inequities. It was recommended that maintenance and
    engineering service hours be used as a better service cost allocation basis. For illustration purposes, the
    following information was appended to the audit report:

    Support Departments:

    Maintenance Engineering
    Maintenance hours used ................................ 400
    Engineering hours used ................................. 400
    Department direct costs................................. P12,000 P54,000

    Production Departments:
    Department A Department B Department C
    Maintenance hours used………………….. 800 200 200
    Engineering hours used…………………... 800 400 400
    Department direct costs………………….. P80,000 P90,000 P50,000

    What is the total cost of Department A, B, C and Main after Service Department Costs is allocated?
    DEPARTMENT
    A B C Maintenance Engineering
    a. Using direct method 5,362.50 6,087.50
    b. Using step-down method 5,350 6,100
    c. Using algebraic method 5,365.21 6,084.21

    Problem 2

    BJARNE DALE has Service Departments A and B and Production Departments X and Y with the
    following data:
    Service Departments Production Departments
    A B X Y
    Direct costs P150 P300 P5,000 P6,000
    Services performed by Dept. A 40% 40% 20%
    Services performed by Dept. B 20% 70% 10%

    What is the total cost of Department A, B, X and Y after Service Department Costs is allocated?
    DEPARTMENT
    A B X Y
    a. Using direct method 5,362.50 6,087.50
    b. Using step-down method 5,350 6,100
    c. Using algebraic method 5,365.21 6,084.21

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