Administration Accounting Maintenance Molding Painting
10,000 30,000 20,000 360,000 90,000
18 10 12 70 100
6.00$ 120.00$ 17.50$ 312.00$ 162.00$
Administration Accounting Maintenance Molding Painting
– 0.06 0.04 0.72 0.18
0.09 – 0.06 0.35 0.50
0.01 0.20 – 0.52 0.27
Maintenance Accounting Administration Molding Painting
200,000$ 400,000$ 250,000$ 687,500$ 485,000$
(200,000) 40,000 2,000 104,000 54,000
– (440,000) 42,128 163,830 234,043
– – (294,128) 235,302 58,826
–$ –$ –$ 1,190,632$ 831,868$
Correct! Correct! Correct! Correct! Correct!
Total of direct costs for all service and producing departments 2,022,500$
Correct!
Direct labor
Overhead (direct)
Overhead (allocated)
Totals
Unit cost:
Direct materials
Molding:
Painting:
Part c. Unit cost of allocated service department costs
Molding
Painting
Total
Problem 11-54
MODEL, INC.
Proportion Used By
Employees
Building area
Equipment value (in 000’s)
Allocation Base
Part a.
Employees
Equipment value
FROM:
Maintenance
Accounting
Administration
Totals
Round allocations to the nearest dollar.
To
Building area
Direct Costs
Administration Accounting Maintenance Molding Painting
10,000 30,000 20,000 360,000 90,000
18 10 12 70 100
6.00$ 120.00$ 17.50$ 312.00$ 162.00$
250,000$
400,000$
200,000$
3.50$
237,500$
Direct labor
Overhead
Direct costs of Molding Department:
Direct costs of Painting Department:
Direct materials
Direct labor
Overhead
MODEL, INC.
Given Data P11-54:
Equipment value (in 000’s)
Employees
Building area
Allocation base
Allocation base use:
Used by
Additional Information:
Administration department cost
Accounting department cost
Maintenance department cost
Desirable average cost per unit of service departments
Administration
Accounting Domestic International
–25 45 180
25,000 – 20,000 80,000
360,000$ 144,000$ 936,000$ 3,600,000$
Administration
Accounting Domestic International
360,000 144,000 936,000 3,600,000
(360,000) – 72,000 288,000
– (144,000) 28,800 115,200
Administration
Accounting Domestic International
Department costs
Part b. Step Method
Total costs allocated
Administration allocation
Accounting Allocation
Totals costs
Correct! Correct! Correct! Correct!
183,673
Administration
Accounting Domestic International
The computed cost to be allocated for Administration is:
Total
Accounting
Administration
Costs
Substitute the computed total Administration costs into the equation for Accounting
and solve as before. Round the final answer to the nearest dollar.
S1 = 360,000 + (.2 x 183,673)
Problem 11-55
BLUSTAR COMPANY
Department costs
Employees
Part c. Reciprocal Method
Part a. Direct Method
Transactions
Department direct costs
Administration allocation
Accounting Allocation
The equations set up:
S2 = 144,000 + 10% S1
S1 = 360,000 + 20% S2
S1 = Administration; S2 = Accounting
Substitute Accounting costs into the equation for Administration and solve in the
shaded area below. Round the final answer to the nearest dollar.
The computed cost to be allocated for Accounting is:
.98 S2 = 180,000
S2 = 144,000 + 36,000 + .02 S2
S2 = 144,000 + .10 (360,000 +.2 S2)
Administration
Accounting Domestic International
– 25 45 180
25,000 – 20,000 80,000
360,000$ 144,000$ 936,000$ 3,600,000$
BLUSTAR COMPANY
Given Data P11-55:
Department direct costs
Transactions
Employees
Summary of operations:
Steam Fixed Variable Equipment
Generation Costs Costs Maintenance Alpha Beta
– – 0.40 – 0.10 0.50
0.10 – – 0.10 0.30 0.50
0.10 – – 0.05 0.55 0.30
0.20 0.10 0.05 – 0.50 0.15
Let: S1 = Steam generation
S2 = Electric generating – fixed
S3 = Electric generating – variable
S4 = Equipment maintenance
P1 = Alpha
Cost source
Part c.
Equipment maintenance (S4)
Electric generating:
Fixed (S2)
Variable (S3)
Services Used by
Electric Generating
Steam Generation
Service Department
Part b.
Problem 11-58
STEAMCO CORPORATION
tenth of a thousand (one decimal place).
Note: All numbers used in this problem are in thousands. Round all allocations to the nearest
Fixed costs
Variable costs
Equipment Maintenance
Steam Fixed Variable Equipment
Generation Costs Costs Maintenance Alpha Beta
– – 0.40 – 0.10 0.50
0.10 – – 0.10 0.30 0.50
0.10 – – 0.05 0.55 0.30
0.20 0.10 0.05 – 0.50 0.15
Direct
Beta (P2)
Electric Generating:
Steam Generation (S1)
Fixed costs (S2)
Variable costs (S3)
Equipment Maintenance (S4)
Alpha (P1)
Income from sale on internally generated power (for part c.)
Annual cost to generate electricity internally
Annual cost of electricity from Power Company
Additional Information:
Electric Generating
Services Used by
STEAMCO CORPORATION
Given Data P11-58:
Steam Generation
Service Department
Summary of services used:
Direct departmental costs:
Equipment Maintenance
Variable costs
Fixed costs