What are the total overhead costs of the operating departments (Eastern and Western) after the support-department costs of Engineering and Information Technology have been allocated using (a) the direct method, (b) the step-down method (allocate Engineering first), (c) the step-down method (allocate Information Technology first), and (d) the reciprocal method? Support-department cost allocations; direct, step-down, and reciprocal methods. BallantineCorporation has two operating departments: Eastern Department and Western Department. Each of theoperating departments uses the services of the company's two support departments: Engineering andInformation Technology. Additionally, the Engineering and Information Technology departments use theservices of each other. Data concerning the past year are as follows:Support DepartmentsInformationEngineering Technology Department Department$250,000Operating DepartmentsEasternWesternTotalBudgeted overhead costs beforeany interdepartment costallocations$300,000$650,000$920,000 $2,120,000Support work furnished:By EngineeringBudgeted Engineering salariesPercentageBy Information TechnologyBudgeted IT service hoursPercentage$60,000$50,000$90,000$200,00030%25%45%100%1,05035%4501,5003,00015%50%100%

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 2BE: Support department allocations The centralized computer technology department of Hardy Company has...

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What are the total overhead costs of the operating departments (Eastern and Western) after the support-department costs of Engineering and Information Technology have been allocated using (a) the direct method, (b) the step-down method (allocate Engineering first), (c) the step-down method (allocate Information Technology first), and (d) the reciprocal method?

Support-department cost allocations; direct, step-down, and reciprocal methods. Ballantine
Corporation has two operating departments: Eastern Department and Western Department. Each of the
operating departments uses the services of the company's two support departments: Engineering and
Information Technology. Additionally, the Engineering and Information Technology departments use the
services of each other. Data concerning the past year are as follows:
Support Departments
Information
Engineering Technology Department Department
$250,000
Operating Departments
Eastern
Western
Total
Budgeted overhead costs before
any interdepartment cost
allocations
$300,000
$650,000
$920,000 $2,120,000
Support work furnished:
By Engineering
Budgeted Engineering salaries
Percentage
By Information Technology
Budgeted IT service hours
Percentage
$60,000
$50,000
$90,000
$200,000
30%
25%
45%
100%
1,050
35%
450
1,500
3,000
15%
50%
100%

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