This problem illustrates how support department cost-allocation methods can be used in a setting different from the
Question:
This problem illustrates how support department cost-allocation methods can be used in a setting different from the example examined in the chapter (Exhibits 14-6 through 14-9). In this problem, the costs of central corporate support departments are allocated to operating divisions. The corporate departments provide services to each other as well as to the operating divisions. Also, this problem illustrates the use of the dual-rate method of allocating support department costs. (The dual-rate method can also be used in manufacturing support department cost allocations.) Computer Horizons budgets the following amounts for its two central cor- porate support departments (legal and personnel) in supporting each other and the two manufacturing divisions-the Laptop Division (LTD) and the Work Station Division (WSD):
Fixed costs are allocated on the basis of budgeted capacity. Variable costs are al- located on the basis of actual usage. Required What amount of support department costs for legal and personnel will be allocated to LTD and WSD using
(a) the direct method,
(b) the step-down method (allocating the Legal Department costs first), and
(e) the reciprocal method?
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780137605545
10th Edition
Authors: Charles T. Horngren, George Foster, Srikant M. Datar