Williams manufactures a variety of iron products, made to customer specification

Question

Williams manufactures a variety of iron products, made to customer specifications, in small batches. Willie Williams, owner, is concerned that he does not have an accurate understanding of the costs of production. You, a newly-minted MBA, have researched his business and identified various costs and cost drivers.

The service departments (Janitorial, HR, and Data Services) are allocated to the two production departments (Welding and Assembly). Janitorial costs are allocated using square feet, HR using number of employees, and Data Services using number of transactions. You recall that there are several approaches to the allocation of service department costs: direct, step-down and reciprocal methods.

If the reciprocal method is applied, which is true?

A. Welding's total costs after allocation are $115,840.52

B. Assembly's total costs after allocation are greater than $100,000

C. Janitorial is allocated $1,119.74 from Data Svcs

D. HR's total costs after allocation are $46,059.25

E. None of the above

Janitorial Welding HR Data Svcs Assembly Total Own costs $12,000 $90,000 $37,200 32,400 $54,000 $225,600 Sqaure feet 500 3,000 1,500 2,000 4,500 11,500 #employees 7 25 8 10 75 125 #transactions (thou) 30 100 180 600 140 1,050 Power usage 22 730 11 17 220 1,000

Explanation / Answer

Answer is option A

Welding's total costs after allocation are $115,840.52

Explanation :

The relationship between the service departments is recognized in the reciprocal method . It indicates that service department costs are allocated to and from the other service departments.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

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