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# 10.42 - 10.42(60 min Cost allocation step method with...

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10.42 (60 min) Cost allocation; step method with analysis and decision making a. Cost allocation using the step method Services from: Natural Gas (S1) Electricity Generatio n (S2) General Administrat ion (S3) Fertiliz er P1 Additiv es P2 Natural Gas - 0. 40 - 0.10 0.50 Electricity Generation 0.10 - 0.15 0.45 0.30 General Administration 0.10 0. 15 - 0.40 0.35 Departmental Costs \$70,00 0 \$ 110,000 \$ 48,000 \$600,0 00 \$440,0 00 Although the problem requires only allocations to S2, here is the complete allocation. Allocation of service costs Natural Gas S1 Electricity Generatio n S2 General Administrat ion S3 Fertiliz er P1 Additiv es P2 Total Natural gas base - 0. 40 - 0.10 0.50 1.00 Proportion of Natural gas base 0.40 - 0.10 0.50 1.00 Allocation of Natural gas cost \$(70,0 00) \$ 28,000 \$ - \$ 7,000 \$ 35,000 \$ - Amount of electricity generation base - - 0.15 0.45 0.30 0.90 Proportion of Electricity generation base - - 0. 1667 0.50 0.3333 1.00 Electricity generation direct cost \$ 110,000 Allocation of adjusted Electricity generation cost \$ (138,000) \$ 23,000 \$ 69,000 \$ 46,000 \$ - Amount of General admin base - - - 0. 40 0 .35 0. 75 Proportion of General admin base - - - 0.53 33 0.4 667 1.00 General admin direct

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