Cooks Galore (CG) manufactures pots. CG has two production departments - Mouldin
ID: 2534761 • Letter: C
Question
Cooks Galore (CG) manufactures pots. CG has two production departments - Moulding and Assembly; and two support departments- Human Resources and Quality Control. CG uses a traditional costing system. The estimated usage of the two support departments and their budgeted costs for March 2018 is as follows: Provider of Service Quality Control 10% Human Resources User of Support Service Human Resources Quality Control Moulding Assembly 20% 30% 50% 100% 60% 30% 100% Budgeted support department costs: Materials and labour (variable) Fixed overhead 80,000 120,000 200,000 50,000 200,000 250,000 Assembly department if the direct method is used to allocate support department costs. (1 mark) 13. Calculate the cost that would be allocated from the Human Resource department to theExplanation / Answer
Solution 13:
From above table, cost to be allocated from human resource department to assembly department using direct method = $125,000
Solution b:
Service department cost = Direct Cost + Allocated Cost
Human Resource Department Cost = $200,000 + Quality control department Cost * 10%
= $200,000 + 0.10*Quality control department Cost
Quality Control Department Cost = $250,000 + Human resource department cost *
= $250,000 + 0.20 * Human resouce department cost
Quality Control Department Cost = $250,000 + 0.20 ($200,000 + 0.10*Quality control department Cost )
Quality Control Department Cost = $250,000 + $40,000 + 0.02*Quality control department Cost
Quality Control Department Cost = $290,000 / 0.98 = $295,918
Hence total cost that would be allocated from Quality control department to other production and support department if reciprocal method is used = $295,918
From Service Department Cost Allocation - Direct Method Service Department Production Department Human Resource Quality Control Moulding Assembly Direct charges of department $200,000.00 $250,000.00 Allocation of Human Resource (3:5) -$200,000.00 $75,000.00 $125,000.00 Allocation of Quality Control (6:3) -$250,000.00 $166,666.67 $83,333.33 Total $0.00 $0.00 $241,666.67 $208,333.33