Question
Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing (purchasing and handling of materials and human resources) and
Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing (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. Total Labor Hours Used by Departments Sourcing Operations Sourcing 10,000 Operations 20,000 The costs incurred in the plant are as follows: Departments Sourcing Operations Assembly Finishing Total Required: Departmental Costs $ 186,000 240,000 424,000 269,000 $ 1,119,000 Assembly 40,000 60,000 Finishing 60,000 50,000 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 answers to nearest whole dollar amount.) Total Service Department Cost Total Production Allocated Cost a. Direct Method Assembly Finishing b. Step Method Assembly
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