Data Performance, a computer software consulting company, has three major functi
ID: 2336302 • Letter: D
Question
Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities:
2,400
Required:
1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments, using these three methods:
a. Direct method.
b. Step method (both for the information systems department going first and for the facilities department going first).
c. Reciprocal method.
(Round percentage calculations to 4 decimal places (e.g., 33.3333%). For all requirements, Do not round your intermediate calculations. Round your final answers to nearest whole dollar amount.)
Required:
1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments, using these three methods:
a. Direct method.
b. Step method (both for the information systems department going first and for the facilities department going first).
c. Reciprocal method.
(Round percentage calculations to 4 decimal places (e.g., 33.3333%). For all requirements, Do not round your intermediate calculations. Round your final answers to nearest whole dollar amount.)
Required:
1. Using computer usage time as the allocation base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments, using these three methods:
a. Direct method.
b. Step method (both for the information systems department going first and for the facilities department going first).
c. Reciprocal method.
(Round percentage calculations to 4 decimal places (e.g., 33.3333%). For all requirements, Do not round your intermediate calculations. Round your final answers to nearest whole dollar amount.)
Programing consulting training Tatal
a direct method
b step method information systems department going first
step method facilities department going first
c reciprocal method
Service Departments Production Departments Information Systems Facilities Computer Programming Information Systems Consulting Software Training Total Budgeted overhead (base) $70,000 $39,000 $166,000 $200,000 $139,000 $614,000 Information Systems (computer hours) 1,200 600 1,200 3,000 6,000 Facilities (square feet) 240 480 480 1,2002,400
Explanation / Answer
Solution 1a:
Solution 1b:
Solution 1c:
Service department cost = Direct Cost + Allocated Cost
Information system Cost = $70,000 + [240/2400]* Facilities cost
= $70,000 + 0.10*Facilities cost
Facilities Cost = $39,000 + [1200 / 6000]* information system Cost
= $39,000 + 0.20 * information system Cost
Facilities Cost = $39,000 + 0.20 ($70,000 + 0.10*Facilities Cost)
Facilities Cost = $39,000 + $14,000 + 0.02*Facilities Cost
Facilities Cost = $53,000 / 0.98 = $54,082
Information system Cost = $70,000 + 0.10*$54,082 = $75,408
From Service Department Cost Allocation - Direct Method Service Department Production Departments Info System Facilities Computer programming Info System Consulting Software training Direct charges of department $70,000 $39,000 $166,000 $200,000 $139,000 Info System (600:1200:3000) -$70,000 $8,750 $17,500 $43,750 Facilities (480:480:1200) -$39,000 $8,667 $8,667 $21,667 Total $0 $0 $183,417 $226,167 $204,417Related Questions
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