978-0077733773 Chapter 7 Solution Manual Part 4

subject Type Homework Help
subject Pages 9
subject Words 661
subject Authors David Stout, Edward Blocher, Gary Cokins, Paul Juras

Unlock document.

This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
page-pf1
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-35 (continued-2)
The Step Method
7-31
page-pf2
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-35 (continued -3)
7-32
page-pf3
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7.36 Departmental Cost Allocation (20 min)
1. Calculate cost allocation
Production
Department
Outside
Price
Percentage
based on
Outside Price
Allocation of Total
Maintenance Cost Using
Outside Prices
A $115,000 25% $450,000 x .25 = $112,500
B 92,000 20 90,000
C 69,000 15 67,500
D 184,000 40 180,000
Total $460,000 100 $450,000
Departments A and C will be charged more based on the outside
pricing percentage, because the cost of obtaining maintenance
outside the firm is higher for these departments.
2. The overall effect of the new plan will be to motivate the production
departments to continue to use the internal supplier of maintenance
when the outside price is high (as in Departments A and C), and
motivate those departments which have an opportunity to obtain
relatively low cost outside maintenance to do so (Departments B and
closely match the outside prices. If so, the firm should consider
adopting a new allocation base.
Note however that we do not know what portion of the $450,000 is
fixed and what portion is variable. If this internal cost is all fixed, then
the use of outsourcing by the two departments will not reduce total
what costs would be saved and what costs would be added by
outsourcing one or more departments.
7-33
Education.
page-pf4
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-34
page-pf5
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-37 Departmental Cost Allocation (30 min)
The Direct Method:
7-35
page-pf6
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-37 (continued -1)
The Step Method
7-36
page-pf7
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
(continued -2)
Reciprocal Method
7-37
page-pf8
Note: Equations to Solve (using Solver):
CFL = 210,000 + .2 x Computer
7-38
page-pf9
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-38 Departmental Cost Allocation (25 min)
The Direct Method
7-39
page-pfa
Chapter 7 - Cost Allocation: Departments, Joint Products, and By-Products
7-38 (continued -1)
The Step Method
The maintenance department goes first since it has a greater percentage of service (25%) to utilities
than the utilities department has to maintenance (15%).
7-40

Trusted by Thousands of
Students

Here are what students say about us.

Copyright ©2022 All rights reserved. | CoursePaper is not sponsored or endorsed by any college or university.