Allocating costs ofsupport departments; dual rates; direct, step-down, and reciprocal methods. Magnum T.A., Inc., specializes in the
Question:
Allocating costs ofsupport departments; dual rates; direct, step-down, and reciprocal methods. Magnum T.A., Inc., specializes in the assembly and installation of high-quality security systems for the home and business segments of the market. The four departments at its highly automated state-of-the-art assembly plant are as follows:
Service Departments Assembly Departments Engineering Support Home Security Systems Information Systems Support Business Security Systems The budgeted level ofservice relationships at the start of the year was Used by Information Home Business Supplied by Engineering Systems Security Security Support Support Systems Systems Engineering Support — 0.10 0.40 0.50 Information Systems Support 0.20 0.30 0.50 The actual level ofservice relationships for the year was Used by Information Home Business Supplied by Engineering Systems Security Security Support Support Systems Systems Engineering Support — 0.15 0.30 0.55 Information Systems Support 0.25 — 0.15 0.60 Magnum collects fixed costs and variable costs of each department in separate cost pools. The actual costs (in thousands) in each pool for the year were Fixed-Cost Pool Variable-Cost Pool 584 CHAPTER 14 Engineering Support Information Systems Support
$2,800 8,100
$8,500 3,750 Fixed costs are allocated on the basis of the budgeted level of service. Variable costs are allo¬
cated on the basis ofthe actual level ofservice.
The support department costs allocated to each assembly department are allocated to products on the basis of units assembled. The units assembled in each department during the year were Home Security Systems Business Security Systems 7,950 units 3,750 units Required 1. Allocate the support department costs to the assembly departments using a dual-rate system and
(a) the direct method, (t)) the step-down method (allocate Information Systems Support first),
(c) the step-down method (allocate Engineering Support first), and
(d) the reciprocal method. Present results in a format similar to that of Exhibit
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780131971905
4th Canadian Edition
Authors: Charles T. Horngren, George Foster, Srikant M. Datar, Howard D. Teall