Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

13,600 14,700 12,800 29,000 23,000 3,600 1,170 2.700 1,170 1.800 780 (9,000) 780 900 (3,900) 312 234 156 (780) 78 Primary apportionment Department X overheads

image text in transcribed

13,600 14,700 12,800 29,000 23,000 3,600 1,170 2.700 1,170 1.800 780 (9,000) 780 900 (3,900) 312 234 156 (780) 78 Primary apportionment Department X overheads apportioned in ratio of (4:3:2:1) Department Y overheads (+3,900) apportioned in the ratio of (3:3:2.2) Department X overheads (780) apportioned in the ratio of 4:3:2:1 Department Y overheads (78) apportioned in the ratio of 3:3:2:2 Department X overheads (16) apportioned in the ratio of 4:3:2:1 Department Y overheads (2) apportioned in the ratio of 3:3:2:2 23 23 16 16 (78) 6 5 3 (16) 2 1 1 1 1 (2) Total 18,712 18,833 15,555 Algebraic Method This method is the most appropriate of all the four methods when reciprocal services exist between service departments. It is also called the reciprocal services method as it takes into account cost flows in both directions between service departments that render services to each other. Typically, the service departments provide services to each other in most of the y39 manufacturing firms in practice. This method provides conceptually the most correct budget cost estimates of service departments and their subsequent apportionment. Example 10.5 illustrates its application. EXAMPLE 10.5 Tiny Industries Ltd has 2 service (SD) and 2 production departments (PD). It employs the algebraic method to allocate budgeted service department costs. The following information is available: Services provided by Department Budgeted costs Department A Department B Total costs: SD A 1,00,000 20 % SD B 2,00,000 35 % Factory overhead costs: PD, 1,40,000 PD 60,000 5,00,000 Direct labour-hours (DLH): 20,000 PD 10,000 From the above information, you are required to: (a) Allocate the service departments costs to production departments. Use algebraic equation method, (b) Compute factory overhead absorption rate, based on direct labour-hours. 15 50 100 % 45 35 100 % PD

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Audit Value Factor Making Managements Head Turn Internal Audit And IT Audit Series

Authors: Daniel Samson

1st Edition

1138198129, 978-1138198128

More Books

Students also viewed these Accounting questions

Question

What lessons in OD contracting does this case represent?

Answered: 1 week ago

Question

Does the code suggest how long data is kept and who has access?

Answered: 1 week ago