I need help with C!! I have the answer to A & B already correct. BluStar...
I need help with C!! I have the answer to A & B already correct.
BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.
| Administration | Accounting | Domestic | International | |||||||||
| Employees | – | 28 | 38 | 34 | ||||||||
| Transactions | 36,000 | – | 20,000 | 80,000 | ||||||||
| Department direct costs | $ | 353,000 | $ | 143,000 | $ | 930,000 | $ | 3,640,000 | ||||
Required:
a. Allocate the cost of the service departments
to the operating departments using the direct method.
b. Allocate the cost of the service departments to
the operating departments using the step method. Start with
Administration.
c. Allocate the cost of the service departments to
the operating departments using the reciprocal method.
Homework Answers
| Let the total cost of Administration and Accounting be x and y |
| x | = | $ 353000 + 36y/136 | (i) | ||
| y | = | $ 143000 + 28x/100 | (ii) | ||
| Putting the value of x in equation (ii), we get | |||||
| y | = | $ 143000 + 28/100($ 353000 + 36y/136) | |||
| y | = | $ 143000 + $ 98840 + 0.074118y | |||
| 0.925882y | = | $ 241840 | |||
| y | = | $ 261199 | |||
| Now, x | = | $ 353000 + [(36 x $ 261199) / 136] | |||
| = | $ 422141 | ||||
| Allocation of cost | ||||||
| Particulars | Admin. | Accounting | Domestic | International | ||
| Direct Cost | $ 3,53,000 | $ 1,43,000 | $ 9,30,000 | $ 36,40,000 | ||
| Allocating cost of: | ||||||
| Administration | $ -4,22,141 | $ 1,18,199 | $ 1,60,414 | $ 1,43,528 | ||
| Accounting | $ 69,141 | $ -2,61,199 | $ 38,412 | $ 1,53,647 | ||
| Total | $ 0 | $ 0 | $ 11,28,825 | $ 39,37,175 | ||
Note: Because of decimals, there might be some differences in the answer.
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I need help with C!! I have the answer to A & B already
correct.
BluStar...
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