Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Selto & Company manufactures and sells T-Shirts for advertising and promotional purposes. The company has two manufacturing operations, shirt-making and printing. When the company
Selto & Company manufactures and sells T-Shirts for advertising and promotional purposes. The company has two manufacturing operations, shirt-making and printing. When the company receives an order for T-shirts, the shirt-making department obtains the materials and colors requested and has the shirts made in the desired mix of sizes. It sends the completed shirts to the printing department where the custom labels or designs are prepared and silk-screened onto the shirts. To support the manufacturing activity, the company has a building that houses the two manufacturing departments as well as the sales department, payroll department, and the design and patterns staff. To aid in cost control, the company accumulates the costs of these support functions in separate service departments: (1) building occupancy, (2) human resources, and (3) design and patterns. During the current period, the direct costs incurred by each department are as follows: Shirt-making (P1) Printing (P2) $210,000 140,000 Sales (P3) 80,000 Building occupancy (S1) 45,000 Human resources (S2) 20,000 Design and patterns (S3) 10,000 Building occupancy costs are allocated on the basis of the number of square feet of each department. Human resources costs are allocated on the basis of the number of full-time equivalent employees. The design and pattern costs are charged to departments on the basis of the number of designs requested by each department. For the current period, the following table summarizes the usage of services by other service cost centers and other departments: S1 S2 S3 P1 22 P2 223 P3 45 15 6 Building occupancy (S1) (square feet) 0 8,100 3,900 27,000 36,000 6,000 3 0 6 30 30 Human resources (S2) (employees) Design and patterns (S3) (designs) 0 0 0 15 45 40 40 5 3. Compute the cost allocations and total costs in each "production department" using the reciprocal method.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Step 1 Identify the direct costs for each department Given Direct Costs P1 Shirtmaking 210000 P2 Printing 140000 P3 Sales 80000 S1 Building occupancy 45000 S2 Human resources 20000 S3 Design and patte...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started