costaccountingch15sol

costaccountingch15sol - CHAPTER 15 ALLOCATION OF...

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CHAPTER 15 ALLOCATION OF SUPPORT-DEPARTMENT COSTS, COMMON COSTS, AND REVENUES 15-16 (20 min.) 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 15-1
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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. 15-2
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15-19 (30 min.) Support department cost allocation; direct and step-down methods. 1. a. Direct Method AS IS Govt. Corp. 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
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costaccountingch15sol - CHAPTER 15 ALLOCATION OF...

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