Question
The Special Products Manufacturing Company has two service departments manufacturing support and facilities management, and two production departments assembly and packing/shipping. The distribution of each
The Special Products Manufacturing Company has two service departments manufacturing support and facilities management, and two production departments assembly and packing/shipping. The distribution of each service department's efforts to the other departments is shown below:
FROM
TO
Support
Facilities Assembly Pack/Ship
Support 0%
45% 25% 30%
Facilities 30%
0% 30% 40%
The direct operating costs of the departments (including both variable and fixed costs) were as follows:
Manufacturing Support
$ 240,000
Facilities Management
450,000
Assembly
1,200,000
Pack/Ship
225,000
Required: (Calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar.):
-
Allocate the service department costs to the production departments using the direct method. (10 points)
-
Allocate the service department costs to the production departments using the step method with the support department going first. (10 points)
-
Allocate the service department costs to the production departments using the reciprocal method. (10 points)
4. Which is the most preferred method and why? (4 points)
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