Question

ForestLand Wood Products manufactures lumber and wood components. The company has two main product lines: Hardwood and Softwood. Hardwoods are used for flooring, cabinetry, paneling, doors and trimwork. Softwoods are used for wall studs, joists, planks, rafters, beams, stringers, posts, decking, subflooring and concrete forms. ForestLand also sells a by-product, wood shavings and saw dust. Shavings are purchased for farm and industrial use as well as for further processing into wood pellets and fiber board. The revenue is allocated to each product line based on the percentage of thousand board feet produced by the product line.

Your accounting firm has been retained by ForestLand for three years. You have been assigned to properly allocate support department costs. Your manager wants the allocation to be as accurate as possible and has instructed you to use the reciprocal services method. She reminds you that revenue from by-products are used to offset costs.

You begin your research and learn that there are four production departments: log yard, milling, drying, and packaging. The Hardwood line produces 300 thousand board feet of product while the Softwood produces 900 thousand board feet. The milling department direct costs, direct labor and overhead per thousand board feet for Hardwood is two times that of Softwood. You have been instructed to use the weighted average method to allocate the costs in the milling department between the two product lines. The remaining department costs are the same for both product lines, per thousand board feet.

There are two support departments: maintenance and administration. The maintenance department is responsible for maintaining all equipment and janitorial duties. Because the equipment is used more extensively for hardwoods, the department cost driver is hours worked. The administration department includes the company president and his staff. Their duties include accounting, human resources, and information technology. The cost driver for the administration department is number of employees.

In your first step, you determine the costs traced to each department and the usage of the support department cost drivers. You have created the following table:

	Maintenance	Administration	Log Yard	Milling	Drying	Packaging
Hours worked	11,000	9,720	8,100	25,920	16,200	21,060
Number of employees	6	4	4	10	12	8
Department costs	$212,960	$261,690	$375,045	$767,400	$524,095	$271,040

Your next step is to determine the proportional usage of each support department's cost driver by the other departments to which its costs are to be allocated. Complete the following tables.

Using the cells below, create the formulas that will simultaneously allocate support department costs among the departments. "M" represents Maintenance and "A" represents Administration.

M = $ + (% )

A = $ + (% )

Solve the equations, If required round any decimal to three places in your computations. For example, .0183 would be rounded to .018. Round your final answer to the nearest dollar.

M = $

A = $

Use the following table to allocate the support cost departments. Round allocated amounts to the nearest whole dollar. If an amount is zero, enter "0".

	Support Departments			Production Departments
	Maintenance	Administration		Log Yard	Milling	Drying	Packaging
Hours worked
Number of employees
Department cost	$	$		$	$	$	$
Maintenance
Administration
Final department costs	$	$		$	$	$	$

Using the rounded amounts from the support cost allocation table (previous task), complete the following table to allocate the production department costs to each product line. Round allocated amounts to the nearest whole dollar.

	Thousand Board Feet	Weight Factor	Weighted Thous. Bd. Ft.	Weighted % of Board Feet			Final Department Costs	Cost Allocation to Product Line
Log Yard:
Hardwood					%	×	$	$
Softwood						×
Total Log Yard					%			$

Answer 1

Page-1 machines Total Answere forest Land wood products manufacturers lumber and wood components. The company has two main product line: Hardwod and soft wood. Maintenance I Admin Employees clood tal Maintenance 15% Admin 9720 120% Log yard | 8100 100%. 14 | 10% Milling 125920 32% 110 125% Doying 116200 20% | 12 | 30% Packaging 121060/26% 1 8 1 20% Total 810001 100% 40 100% *Total Maintenance cost= Maintenance department cost Acost allocated to Maintenance of administration. * Total Administration Costa Administöation department castt cost allocated to administration from maintenance.

Page-2 = 261690+12% of maintenance cost = 261690+ 12.40 of maintenance department costt cost allocated to maintenance from administration. = 261690+ 12% of (212960+15% of admin cost) 7 Administration cost = 261690+120/66212960+0:15 + Administration cost= 261690+25555.2 to 0184 Administration cost= 292510.387 Total administration cost 2927504 (261690 412%:$f 268366) Total administocrtion cost=256836-6@129604150% of 292510.387)

Page-3 Maintenance. Admin Loq yard_milling Doying Dept costs | 212,960.00 201,690.00 375,645.00 767,400.00 524095.00 271,000.00 Packagong Allocation of 256,836.56 30,820.39 25,683.66 82,187.70 51367.3166777.52 Maintenance | Allocation of 43,917.06 292,780.39 29.278.04 73,195.10 187,834.12|58556.00 Admin