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entirely avoidable. The separable costs to produce K1 were $2.60 per unit and to produce
S2 were $0.45 per unit. Operating expenses were $60,000 in 2016 and $12,000 in 2017.
Required:
a. Prepare an income statement for 2016 and 2017 assuming the “other revenue” method
of accounting for by-products is used.
b. Prepare an income statement for 2016 and 2017, assuming the “cost reduction” method
of accounting for by-products is used.
135.
136.
137.
138.
139.
140.
141.
142.
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143.
Boswell Consulting has two service departments: S1 and S2 and three production
departments: P1, P2, and P3. Data for a recent month follow:
S1
S2
P1
P2
P3
Service
Provided
to:
0.10
0.20
0.40
0.30
0.30
0.20
0.40
0.10
Costs
$200,000
$100,000
$600,000
$800,000
$1,000,000
Equations:
.97S1 = 230,000
.97S2 = $120,000
S1 = $237,113
S2 = $123,711
S2
P1
P2
P3
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144.
Morgan and Regis Consultants is a large, international consulting organization. The
company provides consulting services in the computer and Internet areas. The company
also has several divisions that provide manufacturing of various computer parts. The
company has five divisions which are all profit centers. Each division includes allocated
corporate costs in its annual budget. The budget for the coming year for the Building and
Grounds Service department is $6,000,000. Included in this budget is the maintenance of
all corporate buildings, depreciation, cleaning, insurance, and all other facility-related
maintenance costs. The company uses a weighted method of allocating facility costs
based on the type of space maintained by each division. Space ranges from manufacturing
warehouses, which are least expensive to maintain, to computer mainframe space, which
requires specialized temperature controls, air conditioning, and maintenance. The
company has decided to use a weighting system assigning the following relative weights
to each type of space: 1 for warehouse, 3 for office, and 5 for computer space. Below, find
data relating to the five divisions and the square footage of each type of space. Currently,
Division 5, the Internet consulting division, is the largest in sales volume and profits for the
company, which has been growing at the rate of 20% per year, while divisions 3 and 4 have
been struggling due to declining margins on technology products.
Type of space
Office
Computer
Warehouse
Total
Weighting
3
5
1
Division 1
10000
0
0
10000
Division 2
31000
10000
5000
46000
Division 3
15000
12000
32000
59000
Division 4
15000
10000
50000
75000
Division 5
30000
30000
0
60000
Total
101000
62000
87000
250000
Required:
(a) As director of corporate budgeting, you are required to send to each division its facility
allocation for the coming year. Prepare a schedule showing how the budget of $6,000,000
will be allocated to each division.
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11-153
145.
11-155
146.
Liberty Credit Checks produces two styles of credit reports: personal and corporate. The
difference between the two is the amount of background information and data collection
required. The corporate report uses more skilled personnel because additional checking
and data are required. The relevant figures for the year just completed follow: Total
support service costs to be allocated are $3,200,000.
Allocation base
Individual
Corporate
Data purchased
$40,000
$80,000
Research hours
24,000
30,000
Interview hours
1,000
10,000
Number of reports
16,000
3,000