Question

Calculate the total overhead costs of the operating departments (Eastern and Western) after the supportdepartment costs of Engineering and Information Technology have been allocated using the following methods (showing your calculations in tables and footnotes, if needed):

a. direct method

b. step-down method (allocate Engineering first)

c. step-down method (allocate Information Technology first)

d. reciprocal method (be sure to show what equations were used)

Support Departments Operating Departments Information Eastern Western Engineering Technology Department Department Total $300,000 $250,000 $650,000 $920,000 $2,120,000 Budgeted overhead costs before any interdepartment cost allocations Support work furnished: By Engineering Budgeted Engineering salaries Percentage By Information Technology Budgeted IT service hours Percentage $60,000 30% $50,000 25% $90,000 45% $200,000 100% 450 1,050 1,500 50% 3,000 100% 15% 35%

Answer 1

@ Dirut Methode n maar is Partiolais Engineering Informatione Technology Westem Budgeted Oueshed - 300.000 250,000 650,000 920.000 Apportionment of Engineering dept. (300,000) - 107143 192857 (25:45) Apportionment of Inf. Technology (250.) 15625093750 - d (50:30). 913393 | 1206607 (b) Step down method fallocate Engineering first) Particulars Engineering Information aluer Technology Eastern Westem 250,000 90.000 650.000 75000 920,000 135000 Budgeted 044 300,000 Apportionment of (300,000) engineering dept - {"30:25:45) Apportionment of - II department (50:30) (240,000) 212500 127500 937500 1182500

© Step down method Callocate conformation technology nas Information Particulars Engineering Eastern western Budgeted On 300,000 - 250,000 650, 000 920,000 Ap portionment of Londo IT department 37500 (15; 50:35) (250,000) 125000 87500 (337500) 120536 216964 Apportment of engineering dept ( 25; 45) - 89553.6 1224464 (d) Receipoocal method. The total expense of two service department ! will be determined as follows in Let & stand for engineering dept. of I stand for IT dept E = 300,000 + 0.151 I = 250,000 +0.3€ . _ E = 300,000 + 0.15 (250,000 TO 36) E 300,000 + 37500 +0.045€ 00955 E - 337500 F = 253409

250,00D + 0.31353403) 356021 tan porn gia GIPB Droit The expense of - to - - - - น. - - 35 Spporting department allocal Operating department in o rder - ครา 25 - - Production department tastem Western 8 8351159032 Engineering department ( 25.1.245) 353403) 3. 178011_ 124607 Information technology. :: . (356021 of 50%-, 3544) 266362 283639 t Budgeted OH . 650,000_ 920.000 - P 916362 12036 ato དེ་༢རྣ/s:༢༨ ༽ ལྟ་ cons asof og00a5.3 I 09:325! + 700.00 2013 DOES000.00 € 2

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