Answered step by step
Verified Expert Solution
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
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started