Explain and show all your work tional woooooo Ajax Manufacturing has two support
ID: 2591009 • Letter: E
Question
Explain and show all your work tional woooooo Ajax Manufacturing has two support centers, Engineening uction centers, Cutting and Milling. The overhead costs for ALLOC 5. OCATI ,Accounting, and two c nd Acing year for the four departments, and their share of a usage of support services,ws Engineering $350,000 Accounting $250,000 10% Cutting $400,000$600,000 Milling Overhead % Engineering Used 40% 35% 20% 50% &Accounting; Used REQUIRED e the amount of Engineering and Accounting to be charged to the two the amount of Engineering and Accounting to be charged to the two the amount of Engineering and Accounting to be charged to the two Deter-s producing centers using direct allocation. producing centers using sequential allocation Determine roducing centers using reciprocal allocatinnExplanation / Answer
a. Determine the amount of Engineering and Accounting to be charged to the two producing centers using direct allocation.
First we have to calculate the factors to apportion service department overheads:
Cutting
Milling
Total
Engineering
40
50
90
Accounting
35
45
80
Allocation of overheads
Cutting
Milling
Total
Engineering (in the ratio of 40:90)
$1,55,556
$1,94,444
$3,50,000
Accounting (in the ratio of 35:45)
$1,09,375
$1,40,625
$2,50,000
Total Amount allocated
$2,64,931
$3,35,069
$6,00,000
b. Determine the amount of Engineering and Accounting to be charged to the two producing centers using sequential allocation.
Allocation of overheads
Engineering
Accounting
Cutting
Milling
Total
Engineering (in the ratio of 10:40:50)
$35,000
$1,40,000
$1,75,000
$3,50,000
Accounting (in the ratio of 35:45)
-$35,000
$1,24,688
$1,60,313
$2,50,000
Total Amount allocated
$0
$2,64,688
$3,35,313
$6,00,000
a. Determine the amount of Engineering and Accounting to be charged to the two producing centers using direct allocation.
First we have to calculate the factors to apportion service department overheads:
Cutting
Milling
Total
Engineering
40
50
90
Accounting
35
45
80
Allocation of overheads
Cutting
Milling
Total
Engineering (in the ratio of 40:90)
$1,55,556
$1,94,444
$3,50,000
Accounting (in the ratio of 35:45)
$1,09,375
$1,40,625
$2,50,000
Total Amount allocated
$2,64,931
$3,35,069
$6,00,000
b. Determine the amount of Engineering and Accounting to be charged to the two producing centers using sequential allocation.
Allocation of overheads
Engineering
Accounting
Cutting
Milling
Total
Engineering (in the ratio of 10:40:50)
$35,000
$1,40,000
$1,75,000
$3,50,000
Accounting (in the ratio of 35:45)
-$35,000
$1,24,688
$1,60,313
$2,50,000
Total Amount allocated
$0
$2,64,688
$3,35,313
$6,00,000
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