Required information [The following information applies to the questions displayed below.] Marin Company produces two software...
Required information [The following information applies to the questions displayed below.] Marin Company produces two software products (Cloud-X and Cloud-Y) in two separate departments (A and B). These products are highly regarded network maintenance programs. Cloud-X is used for small networks and Cloud-Y is used for large networks. Marin is known for the quality of its products and its ability to meet dates promised for software upgrades. Department A produces Cloud-X, and department B produces Cloud-Y. The production departments are supported by two support departments, systems design and programming services. The sources and uses of the support department time are summarized as follows: From To Total Labor Hours Design Programming Department A Department B Design - 5,000 1,000 9,000 15,000 Programming 400 - 600 1,000 2,000 The costs in the two service departments are as follows: Design Programming Labor and materials (all variable) $ 50,000 $ 36,000 Depreciation and other fixed costs 40,000 4,000 Total $ 90,000 $ 40,000 Required: 1. Determine the total support costs allocated to each of the producing departments using (a) the direct method, (b) the step method (design department goes first), and (c) the reciprocal method? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)
Homework Answers
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| Marin | |||||
| Direct Method | Design | Programming | Dept. A | Dept. B | Total |
| Design Hours | 9,000.00 | 15,000.00 | 24,000.00 | ||
| Design Hours % | 37.50% | 62.50% | 100.00% | ||
| Programming Hours | 1,000.00 | 2,000.00 | 3,000.00 | ||
| Programming Hours % | 33.33% | 66.67% | 100.00% | ||
| Total costs | 90,000.00 | 40,000.00 | 130,000.00 | ||
| Design cost to be allocated- Design Hour Feet % | (90,000.00) | - | 33,750.00 | 56,250.00 | - |
| Programming cost to be allocated- Programming Hour % | (40,000.00) | 13,333.00 | 26,667.00 | - | |
| Total cost after allocation | - | - | 47,083.00 | 82,917.00 | 130,000.00 |
| Step Method | Design | Programming | Dept. A | Dept. B | Total |
| Design Hours | 1,000.00 | 9,000.00 | 15,000.00 | 25,000.00 | |
| Design Hours % | 4.00% | 36.00% | 60.00% | 100.0000% | |
| Programming Hours | 1,000.00 | 2,000.00 | 3,000.00 | ||
| Programming Hours % | 33.33% | 66.67% | 100.00% | ||
| Total costs | 90,000.00 | 40,000.00 | 130,000.00 | ||
| Design cost to be allocated- Design Hour Feet % | (90,000.00) | 3,600.00 | 32,400.00 | 54,000.00 | - |
| Total costs after allocation of design costs | - | 43,600.00 | 32,400.00 | 54,000.00 | 130,000.00 |
| Programming cost to be allocated- Programming Hour % | (43,600.00) | 14,533.00 | 29,067.00 | - | |
| Total cost after allocation | - | - | 46,933.00 | 83,067.00 | 130,000.00 |
| Reciprocal Method | Design | Programming | Dept. A | Dept. B | Total |
| Design Hours | - | 1,000.00 | 9,000.00 | 15,000.00 | 25,000.00 |
| Programming Hours | 400.00 | - | 1,000.00 | 2,000.00 | 3,400.00 |
| Design Hours % | 0.00% | 4.00% | 36.00% | 60.00% | 100.00% |
| Programming Hours % | 11.76% | 0.00% | 29.41% | 58.82% | 100.00% |
| Total costs | 90,000.00 | 40,000.00 | 130,000.00 |
| Let cost of Design is $ X and Programming is $ Y |
| So, X= 90000+ 0.1176Y |
| Y= 40000+ 0.04X |
| Substituting the value of X in equation 2: |
| Y = 40000 + 0.04(90000 + 0.1176Y) |
| Y = 40000 + 3600+.0047Y |
| Y – 0.0047Y = 40000+3600 |
| 0.9953Y = 43,600 |
| Y = 43600/0.9953 |
| Y = $ 43,806 |
| Substituting the value of Y in equation 1: |
| So, X= 90000+ .1176Y |
| So, X= 90000+ 0.1176*43806 |
| So, X= 90000+ 5154 |
| X= $ 95,154 |
| Allocation Summary | Design | Programming | Dept. A | Dept. B | Total |
| Design Hours % | - | 4.00% | 36.00% | 60.00% | 100.00% |
| Programming Hours % | 11.76% | - | 29.41% | 58.82% | 100.00% |
| Department cost | 90,000.00 | 40,000.00 | - | - | 130,000.00 |
| Total costs | |||||
| Design | (95,154.00) | 3,806.00 | 34,255.00 | 57,093.00 | - |
| Programming | 5,154.00 | (43,806.00) | 12,884.00 | 25,768.00 | - |
| Cost after allocation | - | - | 47,139.00 | 82,861.00 | 130,000.00 |
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