PART A. The following data apply to questions 1-4 Billy Stone, Inc., budgets the
ID: 2334477 • Letter: P
Question
PART A. The following data apply to questions 1-4
Billy Stone, Inc., budgets the following amounts for its Buildings & Grounds and Computer Services Departments in servicing each other and the two manufacturing divisions of Signs and Mailers:
Used By
Supplied By
Building & Grounds
Computer Services
Signs
Mailers
Buildings & Grounds
0.2
0.6
0.2
Computer Services
0.15
0.3
0.55
The actual results for the time period were as follows:
Used By
Supplied By
Building & Grounds
Computer Services
Signs
Mailers
Buildings & Grounds
0.1
0.6
0.3
Computer Services
0.25
0.35
0.4
Actual cost data for each department are:
Fixed
Variable
Buildings & Grounds
$ 50,000
$90,000
F Computer Services
$100,000
$21,000
Total fixed costs allocated from Buildings & Grounds to the Signs Department, using the preferred allocation basis, by the direct allocation method are
a. $37,500.
b. $33,333.
c. $30,000.
d. $25,000.
e. none of the above
Total variable costs allocated from Computer Services and Building & Grounds to Mailers Department, using the preferred allocation basis, by the step-down allocation method (begin with Building & Grounds) are
a. $8,400.
b. $12,000.
c. $16,000.
d. $25,235.
e. none of the above
The equation to determine the total variable costs of Computer Services using the preferred allocation basis, for the reciprocal allocation method is
CS = $21,000 + 0.25 B&G.
CS = $21,000 + 0.20 B&G.
CS = $21,000 + 0.15 B&G.
CS = $21,000 + 0.10 B&G.
Based on the reciprocal allocation method, determine the total variable costs allocated to SIGNS using the preferred allocation basis.
PLEASE SHOW WORK
Used By
Supplied By
Building & Grounds
Computer Services
Signs
Mailers
Buildings & Grounds
0.2
0.6
0.2
Computer Services
0.15
0.3
0.55
The actual results for the time period were as follows:
Used By
Supplied By
Building & Grounds
Computer Services
Signs
Mailers
Buildings & Grounds
0.1
0.6
0.3
Computer Services
0.25
0.35
0.4
Explanation / Answer
Answers :
Total Fixed Cost allocated from B&G deptt to Sign by Direct Allocation Method :
Actual Fixed Cost of B&G X Budgeted B&G to Signs / Budgeted B&G to (SIgns + Mailers)
= $ 50,000 X 0.6/ (0.6+0.2) = $ 50,000 X 0.6/0.8 = $ 37,500
Hence, option (a) is correct answer.
Total Variable Costs allocated from CS and B&G to Mailers Deptt - Step by Step Allocation Method :
Step 1: B&G to CS
Actual Variable B&G Cost X Actual B&G to CS
= $90,000 X 0.10 = $ 9,000
Total CS Variable Cost : $ 21,000 + $ 9,000 = $ 30,000
Step 2: CS to Mailers
Total Variable CS Cost X Actual CS to M / Actual CS to (M+S)
= $ 30,000 X 0.40/ (0.40+0.35) = $ 30,000 X 0.40/0.75 = $ 16,000
Hence, option (c) is the correct answer
Equation to determine Total Variable Cost of CS - Reciprocal Allocation Method :
CS = $ 21,000 + 0.10 B&G where B&G = $ 90,000 + 0.25CS
= $ 21,000 + 0.10(90,000 + 0.25CS)
= $ 30,769
Total Variable Cost of CS allocated to Signs using Reciprocal Allocation Method :
$ 30,769 X 0.35/(0.35 + 0.40) = $ 14359
Thanks !
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.