Exam 7: Allocating Costs of Support Departments and Joint Products

Algonquin Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were X-$10,000; Y-$20,000. X sells for $10.00 per unit; Y sells for $7.50 per unit. What is the gross profit of product Y assuming the net realizable value method is used?

Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made. During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000. Normal and actual activity (copies made) are as follows: Copy Center 1 Copy Center 2 Normal activity (copies) 600,000 400,000 Actual activity (copies) 500,000 440,000 For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are:

Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: MD PD P1 P2 Standard service hours used 100 50 300 150 Number of employees 10 20 90 90 Direct labor hours 50 50 250 250 Using the direct method, the cost of the Maintenance Department allocated to Department P1 is:

The __________ method of allocating costs, allocates costs from support to producing departments.

Causal factors are variables or activities within a producing department that stimulate the incurrence of support costs.

Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls. What is the amount of joint costs allocated to Brights using the net realizable value method?

Hunghi Company has three support departments whose direct department costs are $35,000, $45,000, and $55,000, respectively, and two producing departments whose direct department costs are $400,000 and $360,000, respectively. The combined total department cost for the producing departments after allocation of the support departments is

Boysenberry Corp. has two support departments, Personnel (P) and Maintenance (M), and two producing departments, Blending (B) and Finishing (F). Estimated direct costs and percentages of services used by these departments are as follows: Used by Department Support Dept. P M B F - 10\% 60\% 30\% 10\% - 40\% 50\% Direct costs \ 9,000 \ 13,500 \ 40,000 \ 35,000 Required: a.Prepare a schedule allocating the support department costs to the producing departments using the direct allocation method. b.Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method.

Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use 165,000 and 35,000 from the trust area. Assuming a single charging rate is used, if the Corporate Department used 190,000 pages, what would be the printing charges for the Corporate Department? (Round to the nearest cent.)

Departmental overhead is applied to products passing through the department.

Support department fixed costs are allocated on the basis of original capacity.

If a support department's costs were budgeted to be $75,000 and actual costs incurred by the support department were $70,000, the total amount of the support department's costs that should be allocated to other departments is

Describe the differences between support and producing departments. Give three examples of each.

The choice of allocation method depends on an evaluation of costs and benefits, and circumstances.

Moccasin Corp. has two support departments, A and B and two producing departments, P1 and P2. The distribution of services by the support departments is as follows: Services Provided to Services Frovided from A B P1 P2 A - 20\% 45\% 35\% B 20\% - 30\% 50\% $\text { Total department costs for the support and producing departments are as follows: }$ A \ 90,000 150,000 1 850,000 2 700,000 Required: Find the amount of total costs for P1 and P2 using the reciprocal method.

Joint products are two or more products produced simultaneously by the same process.

Under the physical units method, joint costs are distributed to products on the basis of some physical measure.

Which joint cost allocation method is described by the following statement? Overall sales revenue minus overall costs (joint plus further processing costs) is calculated to yield gross profit and the gross profit percentage. Each product is then assigned the same cost of goods sold percentage.

Silver Chariots Trucking Company incurred $5,000 of indirect advertising costs for its operations. The following data have been collected for 2018 for its three departments: Partsand New Trucks Used Trucks Service Sales \ 50,000 \ 35,000 \ 15,000 Direct advertising costs \ 2,500 \ 2,000 \ 500 Newspaper ad space 60\% 35\% 5\% Required: Determine the costs assigned to each department using the following activity drivers: a.Sales b.Direct advertising costs c.Newspaper ad space

Departmental overhead rate is computed by dividing the budgeted base by the total overhead in a producing department.