[LO 7-3] Departmental Cost Allocation Logan Products has two production departmentsassembly and finishing. These are...
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Accounting
[LO 7-3]
Departmental Cost Allocation Logan Products has two production departmentsassembly and finishing. These are supported by two service departmentssourcing (purchasing and handling of raw materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments.
Total Labor Hours Used by Departments
Sourcing
Operations
Assembly
Finishing
Sourcing
20,000
40,000
60,000
Operations
10,000
60,000
50,000
The costs incurred in the plant are as follows:
Departments
Departmental Costs
Sourcing
$165,000
Operations
205,000
Assembly
410,000
Finishing
255,000
Total
$1,035,000
Page 247
Required Use 4 or more decimal places (e.g., 33.3333%) in your calculations.
What are the costs allocated to the two production departments using (a) the direct method, (b) the step method (with the sourcing department going first), and (c) the reciprocal method?
What are the total costs in the production departments after allocation?
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