# Week 11 - Accy211 Management Accounting II Autumn Session...

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Accy211: Management Accounting II Autumn Session 2009 Tutorial solutions: Week 11 CHAPTER 15 Questions Q15-16 Q15-19 Q15-20 Q15-23 Q15-33 15-16: Single-rate versus dual-rate methods, support department. Bases available (kilowatt hours): Rockford Peoria Hammond Kankakee Total Practical capacity Expected monthly usage 10,000 8,000 20,000 9,000 12,000 7,000 8,000 6,000 50,000 30,000 1a. Single-rate method based on practical capacity: Total costs in pool = \$6,000 + \$9,000 = \$15,000 Practical capacity = 50,000 kilowatt hours Allocation rate = \$15,000 ÷ 50,000 = \$0.30 per hour of capacity Rockford Peoria Hammond Kankakee Total Practical capacity in hours Costs allocated at \$0.30 per hour 10,000 \$3,000 20,000 \$6,000 12,000 \$3,600 8,000 \$2,400 50,000 \$15,000 1b. Single-rate method based on expected monthly usage: Total costs in pool = \$6,000 + \$9,000 = \$15,000 Expected usage = 30,000 kilowatt hours Allocation rate = \$15,000 ÷ 30,000 = \$0.50 per hour of expected usage Rockford Peoria Hammond Kankakee Total Expected monthly usage in hours Costs allocated at \$0.50 per hour 8,000 \$4,000 9,000 \$4,500 7,000 \$3,500 6,000 \$3,000 30,000 \$15,000 2. Variable-Cost Pool: Total costs in pool = \$6,000 Expected usage = 30,000 kilowatt hours Allocation rate = \$6,000 ÷ 30,000 = \$0.20 per hour of expected usage Fixed-Cost Pool: Total costs in pool = \$9,000 Practical capacity = 50,000 kilowatt hours Allocation rate = \$9,000 ÷ 50,000 = \$0.18 per hour of capacity Rockford Peoria Hammond Kankakee Total Variable-cost pool \$0.20 × 8,000; 9,000; 7,000, 6,000 Fixed-cost pool \$0.18 × 10,000; 20,000; 12,000, 8,000 Total \$1,600 1,800 \$3,400 \$1,800 3,600 \$5,400 \$1,400 2,160 \$3,560 \$1,200 1,440 \$2,640 \$ 6,000 9,000 \$15,000 The dual-rate method permits a more refined allocation of the power department costs; it permits the use of different allocation bases for different cost pools. The fixed costs result from decisions most likely associated with the practical capacity level. The variable costs result from decisions most likely associated with monthly usage. Page 1 of 7

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Page 2 of 7 15-19: Support department cost allocation; direct and step-down methods. 1. AS IS GOVT CORP a. Direct method costs \$600,000 \$2,400,000 Alloc. of AS costs (40/75, 35/75) (600,000) \$ 320,000 \$ 280,000 Alloc. of IS costs (30/90, 60/90) (2,400,000 ) 800,000 1,600,000 \$ 0 \$ 0 \$1,120,000 \$1,880,000 b. Step-down (AS first) costs \$600,000 \$2,400,000 Alloc. of AS costs (0.25, 0.40, 0.35) (600,000) 150,000 \$ 240,000 \$ 210,000 Alloc. of IS costs (30/90, 60/90) (2,550,000 ) 850,000 1,700,000 \$ 0 \$ 0 \$1,090,000 \$1,910,000 c. Step-down (IS first) costs \$600,000 \$2,400,000 Alloc. of IS costs (0.10, 0.30, 0.60) 240,000 (2,400,000) \$ 720,000 \$1,440,000 Alloc. of AS costs (40/75, 35/75) (840,000 ) 448,000 392,000 \$ 0 \$ 0 \$1,168,000 \$1,832,000 2. GOVT CORP Direct method \$1,120,000 \$1,880,000 Step-down (AS first) 1,090,000 1,910,000 Step-down (IS first) 1,168,000 1,832,000 The direct method ignores any services to other support departments. The step-down
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## This note was uploaded on 12/13/2010 for the course ACCY 201 taught by Professor Kevin during the Three '09 term at University of Wollongong, Australia.

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Week 11 - Accy211 Management Accounting II Autumn Session...

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