Cost Accounting

Problem 7-35 Departmental Cost Allocation [LO 7-3] Logan Products has two production departments-assembly and finishing. These are supported by two service departmentssourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Sourcing Sourcing Operations Total Labor Hours Used by Departments Operations Assembly Finishing 20,000 40,000 60,000 60,000 50,000 10,000 The costs incurred in the plant are as follows: Departments Sourcing Operations Assembly Finishing Total Departmental Costs $ 177,000 225,000 418,000 263, 000 $1,083, 000 Required: Use four decimal places (e.g., 33.3333%) in your calculation of percentages. 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first), and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) Total Service Dept. Cost Allocated Total Production Cost a $ 193,527 $ 208,473 611,527 471,473 Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing