Question

d to r corpo de Bosco e Boston Partners provides an department S following Click the icon to view the cost records DVT) and corporate con CORP) For the first of 2017. Boccordance the Read the regirements Budged overhead costs before department cost o s $ 300 000 200 000 $ 700.000 12.000.000 52180.000 Action AS Alocation of 70 000 $ 8.390 000 $13.510.000 $2 To bugeted v ead of operating 80.000 Requirement t o the part department cos to the weberating departments using the step down med Al Use parentheses s ion when decreasing departments by contra for anyo n ces) lupport Department Operating Departments Stepdown Method GOVT CORP Budowa Al Do not round imary cawn and wond e r is the whole Allocation A bout Allocanonico Cha r utando Check Answe

Answer 1

Ans .1

	Support Department		Operating department
Step Down Method(AS First)	AS	IS	Govt	Corp	Total
Budgeted Overhead Costs
Before interdepartment cost Allocations	600000	1200000	7500000	12580000	21880000
Allocation of AS Cost	-600000	120000	312000	168000
	0	1320000
Allocation of IS Costs		-1320000	528000	792000
Total Budgeted Overhead of operating departments		0	8340000	13540000	21880000

Ans 2

Receprocal Method Equation
AS=	600000	+	0.1	IS	Eq.1
IS=	2400000	+	0.25	AS	Eq.2

Calculation of Ans 2

Substituting the value of IS in equation 1:
AS= 600000+.1(2400000+.25AS)
AS= 600000+240000+.025AS
AS-.025AS = 840000
.975AS = 840000
AS = 861540 ( Rounded off)
Substituting the value of AS in equation 2:
IS = 2400000+.25(861540)
IS = 2400000+215385
IS = 2615385
	Support Department		Operating department
Receprocal	AS	IS	Govt	Corp	Total
Budgeted Overhead Costs
Before interdepartment cost Allocations	600000	2400000	8756000	12452000	24208000
Allocation of AS Cost	-861540	215385	344616	301539
Allocation of IS Costs	261540	-2615385	784615.5	1569231
Total Budgeted Overhead of operating departments	0	0	9885232	14322770	24208002

Ans. 3

The reciprocal allocation method explicitly includes the mutual services provided among all support departments. Interdepartmental relationships are fully incorporated into the support department cost allocations.

You have not requested for calculation of Reciprocal method in Question 3 So no calculation is done for this Question.

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