ForestLand Wood Products manufactures lumber and wood components. The company has two main product lines: Hardwood and Softwood. Hardwoods are used for flooring, cabinetry, paneling, doors and trimwork. Softwoods are used for wall studs, joists, planks, rafters, beams, stringers, posts, decking, subflooring and concrete forms. ForestLand also sells a by-product, wood shavings and saw dust. Shavings are purchased for farm and industrial use as well as for further processing into wood pellets and fiber board. The revenue is allocated to each product line based on the percentage of thousand board feet produced by the product line.

Your accounting firm has been retained by ForestLand for three years. You have been assigned to properly allocate support department costs. Your manager wants the allocation to be as accurate as possible and has instructed you to use the reciprocal services method. She reminds you that revenue from by-products are used to offset costs.

You begin your research and learn that there are four production departments: log yard, milling, drying, and packaging. The Hardwood line produces 300 thousand board feet of product while the Softwood produces 900 thousand board feet. The milling department direct costs, direct labor and overhead per thousand board feet for Hardwood is two times that of Softwood. You have been instructed to use the weighted average method to allocate the costs in the milling department between the two product lines. The remaining department costs are the same for both product lines, per thousand board feet.

There are two support departments: maintenance and administration. The maintenance department is responsible for maintaining all equipment and janitorial duties. Because the equipment is used more extensively for hardwoods, the department cost driver is hours worked. The administration department includes the company president and his staff. Their duties include accounting, human resources, and information technology. The cost driver for the administration department is number of employees.

In your first step, you determine the costs traced to each department and the usage of the support department cost drivers. You have created the following table: Maintenance Administration Log Yard Milling Drying Packaging 17,820 Hours worked 11,825 10,692 8,910 Number of employees 28,512 12 $835,100 23,166 16 $508,700 Department costs $205,600 $248,600 $369,200 $290,100 Your next step is to determine the proportional usage of each support department's cost driver by the other departments to which its costs are to be allocated. Complete the following tables. Maintenance Department Hours Worked Usage Percent Administration 12 12 % 10,692 8,910 Log Yard 10 Milling 28,512 32 Drying 23,166 26 20 Packaging 17,820 Totals 89,100 100 % Administration Department # of Employees Usage Percent Maintenance 8 % 16 12 Log Yard 6 Milling 24 12 16 Drying 32 Packaging 16 Totals 50 100 % Using the cells below, create the formulas that will simultaneously allocate support department costs among the departments. "M" represents Maintenance and "A" represents Administration. M = $ 205,600 + 16 % A ) A = $ 248,600 + 12 % M ) Solve the equations, If required round any decimal to three places in your computations. For example, .0183 would be rounded to .018. Round your final answer to the nearest dollar. 245,376 x M = $ A = $ A = $ Use the following table to allocate the support cost departments. Round allocated amounts to the nearest whole dollar. If an amount is zero, enter "0". Support Departments Production Departments Maintenance Administration Log Yard Milling Drying Packaging Hours worked 11,825 10,692 8,910 28,512 23,166 17,820 12 16 & Number of employees 1 Department cost $ 8 205,600 1 $ 5 248,600 6 369,200 12 835,100 16 508,200 8 290,100 $ $ $ $ Maintenance Administration Final department costs $ Using the rounded amounts from the support cost allocation table (previous task), complete the following table to allocate the production department costs to each product line. Round allocated amounts to the nearest whole dollar. Weight Thousand Board Feet Weighted Thous. Bd. Ft. Weighted % of Board Feet Final Department Costs Cost Allocation to Product Line Factor Log Yard: Hardwood % * $ Softwood Accounting numeric field Total Log Yard Milling: Hardwood Softwood Total Milling Drying: Hardwood % * Softwood Total Drying Packaging: Hardwood % X $ Softwood Total Packaging Forest Land earns revenue of $100,000 from selling its by-products, wood shavings and saw dust. Allocate the revenue to each product line in the following table and determine the final cost per product line. Thousand Board Feet Percentage of Board Feet By-product Revenue Portion of By- product Revenue Hardwood % C $100,000 100,000 $ C Loftwood TotalL Cost per Product Line Hardwood Softwood Log Yard Milling Drying Packaging Subtotal Portion of By-product revenue Total cost per product line In your first step, you determine the costs traced to each department and the usage of the support department cost drivers. You have created the following table: Maintenance Administration Log Yard Milling Drying Packaging 17,820 Hours worked 11,825 10,692 8,910 Number of employees 28,512 12 $835,100 23,166 16 $508,700 Department costs $205,600 $248,600 $369,200 $290,100 Your next step is to determine the proportional usage of each support department's cost driver by the other departments to which its costs are to be allocated. Complete the following tables. Maintenance Department Hours Worked Usage Percent Administration 12 12 % 10,692 8,910 Log Yard 10 Milling 28,512 32 Drying 23,166 26 20 Packaging 17,820 Totals 89,100 100 % Administration Department # of Employees Usage Percent Maintenance 8 % 16 12 Log Yard 6 Milling 24 12 16 Drying 32 Packaging 16 Totals 50 100 % Using the cells below, create the formulas that will simultaneously allocate support department costs among the departments. "M" represents Maintenance and "A" represents Administration. M = $ 205,600 + 16 % A ) A = $ 248,600 + 12 % M ) Solve the equations, If required round any decimal to three places in your computations. For example, .0183 would be rounded to .018. Round your final answer to the nearest dollar. 245,376 x M = $ A = $ A = $ Use the following table to allocate the support cost departments. Round allocated amounts to the nearest whole dollar. If an amount is zero, enter "0". Support Departments Production Departments Maintenance Administration Log Yard Milling Drying Packaging Hours worked 11,825 10,692 8,910 28,512 23,166 17,820 12 16 & Number of employees 1 Department cost $ 8 205,600 1 $ 5 248,600 6 369,200 12 835,100 16 508,200 8 290,100 $ $ $ $ Maintenance Administration Final department costs $ Using the rounded amounts from the support cost allocation table (previous task), complete the following table to allocate the production department costs to each product line. Round allocated amounts to the nearest whole dollar. Weight Thousand Board Feet Weighted Thous. Bd. Ft. Weighted % of Board Feet Final Department Costs Cost Allocation to Product Line Factor Log Yard: Hardwood % * $ Softwood Accounting numeric field Total Log Yard Milling: Hardwood Softwood Total Milling Drying: Hardwood % * Softwood Total Drying Packaging: Hardwood % X $ Softwood Total Packaging Forest Land earns revenue of $100,000 from selling its by-products, wood shavings and saw dust. Allocate the revenue to each product line in the following table and determine the final cost per product line. Thousand Board Feet Percentage of Board Feet By-product Revenue Portion of By- product Revenue Hardwood % C $100,000 100,000 $ C Loftwood TotalL Cost per Product Line Hardwood Softwood Log Yard Milling Drying Packaging Subtotal Portion of By-product revenue Total cost per product line