Snowcap Electronics is a manufacturer of data storage devices. Snowcap consists
ID: 2380859 • Letter: S
Question
Snowcap Electronics is a manufacturer of data storage devices. Snowcap consists of two service departments (maintenance and computing) and two production departments (assembly and testing). Maintenance costs are allocated on the basis of square footage occupied, and computing costs are allocated on the basis of the number of computer terminals. The following data relate to allocations of service department costs:
Maintenance
Computing
Assembly
Testing
Allocate the service department costs to production departments using the direct method. (Round calculations for maintenance proportion to 2 decimal places, e.g. 0.25 and final answers to 0 decimal places, e.g. 5,250.)
Allocated to
Maintenance
Computing
Assembly
Testing
Service department costs $700,000 $900,000 Square footage 100,000 50,000 Terminals 20 60 Snowcap Electronics is a manufacturer of data storage devices. Snowcap consists of two service departments (maintenance and computing) and two production departments (assembly and testing). Maintenance costs are allocated on the basis of square footage occupied, and computing costs are allocated on the basis of the number of computer terminals. The following data relate to allocations of service department costs: Allocate the service department costs to production departments using the direct method.Explanation / Answer
Since maintenance cost is divided on the basis of square footage,
Suare footage of Assembly = 100000
Suare footage of Testing = 50000
Therefore ratio of distribution is 100000 : 50000 i.e. 2:1
Since Computing cost is divided on the basis of no of terminals,
No. of terminals of Assembly = 20
No. of terminals of Testing = 60
Therefore ratio of distribution is 20 : 60 i.e. 1:3
Assembly:
Maintenance = 2/3*700000 = $466,666.67
Computing = 1/4*900000 = $225,000
Therefore Total Cost = 466666.67 + 225000
= $691,667
Testing:
Maintenance = 1/3*700000 = $233,333.33
Computing = 3/4*900000 = $675,000
Therefore Total Cost = 233333.33 + 675000
= $908,333
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