Problem 11-66 (Algo) Reciprocal Cost Allocation-Outsourcing a Service Department (LO 11-4, 5)Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments(Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded.Using DepartmentSupplyingDepartmentProcessingAdministrationMaintenanceDirect costProcessing Administration0010%$86,000Variable costsFixed costsTotal costsAvoidable fixed costsC.50%020%a. Processing Departmentb. Administration DepartmentMaintenance Department$590,000Maintenance000$256,000MaximumAmountBranches10%60%20%$4,400,000The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows.Processing Administration Maintenance Branches$133,000$1,800,000$60,00026,000$153,000437,000123,0002,600,000$86,000$256,000$4,400,000$590,000$276,000$ 8,000$ 84,000 $ 670,000 $ 630,000Electronic40%40%50%$2,350,000Required:a. If GECU outsources the Processing Department, what is the maximum it can pay an outside vendor without increasing total costs?b. If GECU outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing totalcosts?c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs?Electronic$1,250,0001,100,000$2,350,000

Outsourcing: It is a practice in business where a company hires the outside party to create goods…

Required: a. If GECU outsources the Processing Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If GECU outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs? a. Processing Department b. Administration Department C. Maintenance Department Maximum Amount

Required: a. If GECU outsources the Processing Department, what is the maximum it can pay an outside vendor without increasing total costs? b. If GECU outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? c. If GECU outsources the Maintenance Department, what is the maximum it can pay an outside vendor without increasing total costs? a. Processing Department b. Administration Department C. Maintenance Department Maximum Amount

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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A company uses charging rates to allocate service department costs to the using departments. The accountant compiled the following information on one of the service departments: If Department K plans to use 1,350 hours of the service departments service in the coming year, how much of the service departments cost is allocated to Department K? a. 3,375 b. 27,300 c. 26,325 d. 23,950
Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-3, 4) Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded: Supplying Department Using Department Processing Administration Maintenance Branches Electronic Processing 0 40 % 0 15 % 45 % Administration 0 0 0 60 % 40 % Maintenance 10 % 20 % 0 20 % 50 % Direct cost $ 89,000 $ 590,000 $ 310,000 $ 4,900,000 $ 1,950,000 Required: Allocate the service department costs to the two operating departments using the reciprocal method.
O -34 Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: IT tickets Employees Department direct costs a. The order of allocation starts with IT. b. The order of allocation starts with HR. Required B IT HR 1,800 0 16 $ 157,000 $ 268,000 Required: Use the step method to allocate the service costs, using the following: From: Service department costs HR IT Total costs 0 Complete this question by entering your answers in the tabs below. HR Publishing 1,800 24 $430,000 Required A Use the step method to allocate the service costs, using the following: The order of allocation starts with HR. Note: Amounts to be deducted should be indicated by…
Service Department Charges and Activity Bases Middler Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for October. CCS ServiceCategory Activity Base Budgeted Cost Budgeted ActivityBase Quantity Help desk Number of calls $103,360 3,200 Network center Number of devices monitored 634,375 8,750 Electronic mail Number of user accounts 78,100 7,100 Smartphone support Number of smartphones issued 144,320 8,200 One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector: • The sector has 3,000 employees,…
Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost Using Department Transactions IT Operations Retail Commercial Ө Ө 70% 30% 10% Ө 20% 30% 40% 50% Ө Ө 10% 40% $ 390,000 $ 810,000 $ 1,650,000 $ 3,850,000 $ 2,400,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. From: Costs Operations Allocated to: Transactions Retail Commercial IT $ 810,000 $ 162,000 $ 81,000 $ 243,000 $ 324,000 Operations Transactions Total $ 243,000 $ 324,000
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Service Department Charges and Activity Bases Middler Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for October. CCS ServiceCategory Activity Base Budgeted Cost Budgeted ActivityBase Quantity Help desk Number of calls $164,650 3,700 Network center Number of devices monitored 607,950 9,650 Electronic mail Number of user accounts 51,750 5,750 Smartphone support Number of smartphones issued 131,040 9,100 One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector: • The sector has 2,000 employees,…
Service Department Charges and Activity Bases Middler Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for October. CCS ServiceCategory Activity Base Budgeted Cost Budgeted ActivityBase Quantity Help desk Number of calls $160,000 3,200 Network center Number of devices monitored 735,000 9,800 Electronic mail Number of user accounts 100,000 10,000 Handheld Technology support Number of handheld devices issued 124,600 8,900 One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector: The sector has…
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Service Department Charges and Activity Bases Middler Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for October. CCS ServiceCategory Activity Base Budgeted Cost Budgeted ActivityBase Quantity Help desk Number of calls $132,650 3,500 Network center Number of devices monitored 630,400 9,850 Electronic mail Number of user accounts 64,800 7,200 Handheld technology support Number of handheld devices issued 133,920 9,300 One of the profit centers for Middler Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector: The sector has…