Support department cost allocation 760 Blue Mountain Masterpieces produces pictures, paintings, and other home decor, The Printing and Framing production departments are supported by the Janitorial and Security departments, Janitorial costs are allocated to the production departments based on square feet and security costs are allocated based on asset value. Information about these departments is detailed in the following table: Janitorial Security Printing Framing Department Department Department Department Square feet 1,040 4,230 4,770 Asset value $900 $1,240 $12,390 $8,610 Department cost $5,200 $6,600 $33,000 $29,000 Management has experimented with different support department cost allocation methods in the past. The different allocation methods did not yield large differences of cost allocation to the production departments 1. Determine which support department cost allocation method Blue Mountain Masterpieces would most likely use to allocate its support department costs to the production departments a. Direct cost allocation method b. Sequential cost allocation method. c. Reciprocal cost allocation method. d. None of the above. 2. Determine the total costs allocated from each support department to each production department using the method you determined in part (1) Printing Framing Department Department Janitorial Department cost allocation Security Department cost allocation 3a. Identify the department that gets higher cost due to square feet based cost allocation a. Janitorial department b. Security department c. Printing department dierences of cost allocation to the production departments, 1. Determine which support department cost allocation method Blue Mountain Masterpieces would most likely use to allocate its support department costs to the production departments a. Direct cost allocation method b. Sequential cost allocation method c. Reciprocal cost allocation method d. None of the above 2. Determine the total costs allocated from each support department to each production department using the method you determined in part (1) Printing Framing Department Department Janitorial Department cost allocation Security Department cost allocation 3a. Identify the department that gets higher cost due to square feet based cost allocation a. Janitorial department b. Security department c Printing department d. Framing department 3b. Identify the department that gets higher cost due to asset value based cost allocation. a. Janitorial department b. Security department C. Printing department d. Framing department Check My Work Next Support activity cost allocation Jake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production activities are supported by the Maintenance and Security activities Security costs are allocated to the production activities based on asset value. Maintenance costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information regarding the activities is provided in the following table: Maintenance Security Mining Cutting Number of service calls 17 20 60 20 Machine hours 89 88 182 176 Asset value $200,000 $80,000 $300,000 $300,000 Department cost $25,000 $42,500 $160,000 395,000 1. Is the process of allocating maintenance costs based on machine hours correct? Identify the measure than can possibly be used to allocate the maintenance costs Measures that can possibly be used to allocate the maintenance costs a Number of service calls b. Asset value c. Department cost d. None of the above 2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services method and the most appropriate cost driver for Maintenance. Maintenance Security Mining Cutting Department Department Department Department Maintenance cost allocation Security cost allocation Production activities total costs 3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated from each support activity to the other activities Mining Cutting UOMOVIC b. Asset value c. Department cost d. None of the above 2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services method and the most appropriate cost driver for Maintenance. Maintenance Security Mining Cutting Department Department Department Department Maintenance cost allocation Security cost allocation Production activities total costs 3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated each support activity to the other activities Mining Cutting Particulars Department Department Maintenance cost Security cost Production activities total cost Is it viable for the company to choose the direct method of cost allocation? Which of the following supports your answer? a. The direct cost allocation method is too simple and it is not accurate, b. The difference between the direct cost allocation method and the reciprocal method is minimal and the direct method is easier c. The reciprocal method of cost allocation is more accurate and easier than the direct method. d. None of the above. Joint cost allocation Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of $250 per batch. At the split-off point, one batch produces 80, 40, and 25 bottles of hand, body, and foot lotion, respectively. After the split-off point, hand lotion is sold immediately for $2.50 per bottle Body lotion is processed further at an additional cost of $0,25 per bottle and then sold for $5.75 per bottle. Foot lotion is processed further at an additional cost of $0.85 per bottle and then sold for $4.00 per bottle. Assume that body and foot lotion could be sold at the split-off point for $3.00 and 53.20 per bottle, respectively. 1. Using the market value at split-off method, allocate the Joint costs of production to each product, Round your answers to two decimal places. Market Value Total Market Percent of Bottles per Bottle at Value at Total MV at Joint Product per Batch Split-Off Split-Off Split-Off Joint Costs Allocation Hand lotion % Body lotion % Foot lotion Totals 2. A lotion manufacturing company produces three types of lotions. After the split-off point the company continues to sell the body lotion and makes $0.25 profit per bottle. The foot lotion generates $0.05 loss per bottle if it continues after the split-off point. Which lotion should be continued after the split-oft point? a. Hand lotion b. Body lotion Foot lotion d. Body and foot lotion 3. Allocate the joint costs of production to each product using the net realizable value method. Round your answers to two decimal places. Market Value per Bottle at Total Market Value at Bottles Market Price Added Cost NRV Total Net Realizable Market Value per Bottle at Split-orr Bottles per Batch Total Market Value at Split-Off Percent of Total MV at Split-orr Joint Product Joint Costs Allocation Hand lotion % Body lotion % Foot lotion % Totals 2. A lotion manufacturing company produces three types of lotions. Alter the split-off point the company continues to sell the body lotion and makes $0.25 profit per bottle. The foot lotion generates $0.05 loss per bottle if it continues after the split-off point. Which lotion should be continued after the split-off point? a. Hand lotion b. Body lotion c. Foot lotion d. Body and foot lotion 3. Allocate the joint costs of production to each product using the net realizable value method. Round your answers to two decimal places. Market Value per Bottle at Split-orr Bottles per Batch Total Market Value at Split-Off Joint Product Market Price per Bottle Added Cost per Bottle Total Realiz Valt NRV per Bottle Hand lotion Body lotion Foot lotion Totals Check My Work Previous Nex eBook Show Me How Joint cost allocation Florissa's Flowers jointly produces three varieties of flowers in the same garden tulips, lilies, and daisies. The flowers are all watered via the same irrigation system and all receive the same amount of water, daisies require three times as much as illes, and the water required for tulips is about halfway between the amounts needed for daisles and lilies. Although the lilies and tulips receive more water than they need due to the Joint irrigation process, they are not hurt by the overwatering. The joint production cost of the three varieties of flowers is about $30 per harvest Every harvest yields 10 tulips, 20 lies, and 20 daisies. 1. Allocate the joint costs of production to each product using the physical units method Joint Flowers Joint Product per Harvest Proportion Costs Allocation Tulip Lily % $ % Daisy 9% Totals Which products receive the largest portion of the joint costs? received the largest portion of the joint costs. 2. Allocate the joint costs of production to each product using the weighted average method. Weighted Weighted Joint Flowers Weight Flowers Percent Joint Product per Harvest Factor of Water of Water Costs Tulip % $ Lily Daisy % Allocation Totals Which product receives the largest portion of the joint costs? received the largest portion of the joint costs 3. Why would it be important to consider the watering process as an appropriate weight factor? a. The cost of watering the plants is a large portion of the joint costs and the company follows the same irrigation system for all three varieties of flowers, biblicacione obook Show Me How the overwatering. The joint production cost of the three varieties of powers is about $0 per harvest. Every harvest yields tuus, 20 lilies and 20 SIOS 1. Allocate the joint costs of production to each product using the physical units method Joint Flowers Joint Product per Harvest Proportion Costs Allocation Tulip % Lily Daisy Totals Which products receive the largest portion of the joint costs? Allocation received the largest portion of the joint costs. 2. Allocate the Joint costs of production to each product using the weighted average method. Weighted Weighted Joint Flowers Weight Flowers Percent Joint Product per Harvest Factor of Water of Water Costs Tulip % $ Lily % Daisy % Totals Which product receives the largest portion of the joint costs? received the largest portion of the joint costs. 3. Why would it be important to consider the watering process as an appropriate weight factor? a. The cost of watering the plants is a large portion of the Joint costs and the company follows the same irrigation system for all three varieties of flowers. b. It is a natural resource which is more precious. c. Dalsies have the highest market value. d. None of the above
