2 Albemaric, Inc, has two producing departments. Each producing departmenst is h

Question

2 Albemaric, Inc, has two producing departments. Each producing departmenst is held nesponsible for a share of the costs of a support department Actual and budgeted data are as follows: 2018 Support department hours used Department X Department Y Total hours 8,000 16,000 24,000 Support department costs: Actual support department costs Budgeted fixed service center costs Budgeted variable rate per hour $72,000 $24,000 s 3.00 Normal support department usage is 12,000 hours each for Department X and Department Y Required: a Assuming the purpose is product costing, allocate the costs of the support department using the b. Assuming the purpose is to evaluate performance, allocate the costs of the support department direct method

Explanation / Answer

a) Allocation of cost if the purpose is product costing (Amount in $)

If the purpose is product costing then normal usage of hours will be used for calculating variable costs allocated.

b) Allocation of cost if the purpose is performance evaluation (Amount in $)

If the purpose is performance evaluation then actual usage of support department hours will be used for calculating variable costs allocated.

Particulars Department X Department Y Variable costs allocated (12,000 hours*$3 per hour) 36,000 (12,000 hours*$3 per hour) 36,000 Fixed costs allocated [24,000*(12,000 hrs/24,000 hrs)] 12,000 [24,000*(12,000 hrs/24,000 hrs)] 12,000 Total costs allocated 48,000 48,000

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