Question

Robinson Products Company has two service departments (S1 and S2) and two production departments (P1 and P2) The distribution of each service department's efforts (in percentages) to the other departments is: 20 7 30 The direct operating costs of the departments (including both variable and fixed costs) are: S1 $225,000 $2 $2 2,000 P2 165,000 Required 1. Determine the total cost of P1 and P2 using the direct method. 2. Determine the total cost of P1 and P2 using the step method. 3. Determine the total cost of P1 and P2 using the reciprocal method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine the total cost of P1 and P2 using the direct method. (Do not round intermediate calculations.) department 2 Required 2 < Prev 2015 İll Next>

Answer 1

Robinson Products Company 1.Determine the total cost of P1 and P2 using the direct method First, find the unknown service rates: From S1 to P2 = 100%-10%-20% = 70% From S2 to P1 100%-10%-30% 6096 The Direct Method Net service to both Production Departments for Service Department 1: 100%-10%-90% Production Department 1 share: 20%/90%-2/9 Production Department 2 share: 70%/90%-7/9 Net Service to both Production Departments for Service Department 2: 100%-10%-90% Production Department 1 share: 30%/90% 1/3 Production Department 2 share: 60%/90%-2/3 Production department 1 Production department 2 225000 x 7/9 175000 225000 x 2/9-50000 Service department 1 cost allocation Service department 2 cost allocation 72000 x 1/3 24000 72000 x 2 /3 48000 Add: Initial Production Dept. Costs 59000 165000 Total Cost for Each Production Dept. 133000 388000

2.Determine the total cost of P1 and P2 using the step method Step Method Service Dept 2 Production Dept 1 Allocation of Service Dept 1 225000 x 1096 = 22500 225000 x 20%-45000 7200022500 94500 x 1/3 31500 Allocation of Service Dept 2 Add: Initial Production Dept Costs 59000 Total Cost for Each Production Dept. 135500 3.Determine the total cost of P1 and P2 using the reciprocal method The Reciprocal Method Solve the Simultaneous Equations: S1 $225,000(0.1x S2) S2 $72,000(0.1x S1) S1 $225,000[0.1x ($72,000 +0.4 x S1)] 0.96S1 $232,200 S1 $241,875 S2 $72,000 (0.1x $241,875) S2 = $96,188 Production department 1 Production department 2 Service Dept 1 cost allocation 241875 x 0.20 = 48375 241875 x 0.70169313 Service Dept 2 cost allocation 96188 x 0.30 28856 96188 x 0.60 57713 Add: Initial Production Dept Costs 59000 165000 Total Cost for Each Production Dept. 136231 392026