value 4.00 points Caro Manufacturing has two production departments, Machining a

Question

value 4.00 points Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow of Services Used Department Direct Costs Maintenance Cafeteria Machining Assembly $135,000 66,000 45,000 34,000 0.4 0.2 0.3 0.2 0.3 0.6 Required Use the reciprocal method to allocate the service costs. (Matrix algebra is not required.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. From: Service department costs Cafeteria Total

Explanation / Answer

Total service department costs=Direct costs of the service department + Cost allocated to the service department

S1 (Maintenance) = 45,000 + 0.6S2

S2 (Cafeteria) = 34,000 + 0.3S1

Substituting, the first equation into the second yields,

S2 = 34000 + 0.3(45000 + 0.6 S2)

S2=34000 + 13500 + 0.18 S2

0.82 S2 = 47500

S2= 47500/0.82 =57927

Substituting the value of S2 back into the first equation gives,

S1 = $45000 + 0.60 (57927)

S1 = $79756

Maintenance:

79756*0.3 =23927

79756*0.4=31902

79756*0.3=23937

Cafeteria:

57927*0.6 = 34756

57927*0.2 =11585

57927*0.2 =11586

Cost Allocation to: From: Maintenance Cafeteria Machining Assembly Service department costs 45000 34000 0 0 Maintenance -79756 23927 31902 23927 Cafeteria 34756 -57927 11585 11586 Total 0 0 43487 35513

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.