56. The accountants for Elliot, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have been collected about use of services Maint Admin- enance istration Opl Op2 Op3 Services Supplied By: 25% 50% 12.5% 12.5% (based on square metres) Administration 20% 20% 40% 20% (based on number of employees) Assume the reciprocal method. The equation to express the full cost of the Maintenance department is: a) Maintenance $12,000+(0.50 x Administration) b) Maintenance $12,000 + (0.20 x $54,000) c) Maintenance $12,000 + (0.20 x Administration) d) Maintenance = $12,000 + (0.25 x $54,000) Answer: c Difficulty: Medium Learning Objective: Explain how the reciprocal method is used to allocate support costs to operating departments. CPA: Management Accounting 57. The accountants for Elliot, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have beern collected about use of services: Maint Admin- enance istration pOp2 Op3 Services Supplied By 25% 50% 12.5% 12.5% (based on square metres) Administration 20% 20% 40% 20% 57. The accountants for Elliot, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have been collected about use of services: enance istration Op Op2 Services Supplied By: 25% 50% 12.5% 12.5% (based on square metres) 20% 20% 40% 20% (based on number of employees) Use the reciprocal method. The cost of Administration department after support cost allocations but before allocation to the operating departments is: a) $58,800 b) $60,800 c) $60,000 d) $59,368 Answer: c Difficulty: Medium Learning Objective: Explain how the reciprocal method is used to allocate support costs to operating departments. 58. The accountants for Elliot, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have beern collected about use of services: MaintAdmin- enance istration OpOp2 Services Supplied By 25% 50% 12.5% 12.5% (based on square metres) Administration 20% 20% 40% 20% 58. The accountants for Elliot, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have been collected about use of services: MaintAdmin- enance tration Op Op2 Services Supplied By: Maintenance 25% 50% 12.5% 12.5% (based on square metres) 20% 20% 40% 20% (based on number of employees) Using the reciprocal method, the allocation from the maintenance department to Op1 department is: a) $6,000 b) $13,600 c) $13,421 d) $12,000 Answer: d Difficulty: Medium Learning Objective: Explain how the reciprocal method is used to allocate support costs to operating departments. CPA: Management Accounting 59. The accountants for Elliot, Inc. are preparing the operating departments overhead budgets. The Maintenance department direct costs are $12,000, and the Administration department direct costs are $54,000. The following data have been collected about use of services: Maint Admin- enance istration Op Op2 Services Supplied By: 25% 50% 12.5% 12.5% (based on square metres) 20% 20% 40% 20%
