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Kovacik manufactures two types of piggy banks in two different departments: a kangaroo-shaped piggy bank and a platypus-shaped piggy bank. The plant is highly automated
Kovacik manufactures two types of piggy banks in two different departments: a kangaroo-shaped piggy bank and a platypus-shaped piggy bank. The plant is highly automated and contains only two other departments: (1) engineering and design, and (2) information systems. Kovacik allocates support department costs according to estimated service use. Estimated information for next year is as follows:
Required:
Explain why actual total allocated costs will turn out to be different from the estimated total allocated costs.
Operating Support Engineering Information & design systems Kangaroo bank Platypus bank Direct costs $2,700 $8,000 $10,000 $20,000 Services used Engineering & design 10% 40% 50% Information systems 20% 30% 50% Production volume 8,000 4,000 Total allocated costs are assigned to individual units using the production volumeStep by Step Solution
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