Class Notes (810,827)
Accounting (108)
ACCTG424 (12)
Lecture

# Chapter 14 In Class Questions_solutions_only.pdf

7 Pages
48 Views

School
University of Alberta
Department
Accounting
Course
ACCTG424
Professor
Trish Stringer
Semester
Fall

Description
In Class #14.1 Required 1 Assume that a single cost pool is used for the power plant costs. What budgeted amounts will be allocated to each manufacturing division if (a) the rate is calculated based on practical capacity and costs are allocated based on practical capacity and (b) the rate is calculated based on expected monthly usage and costs are allocated based on expected monthly usage? Bases available (kilowatt hours): Mississauga Cambridge BurlingtonBrantford Total Practical capacity 10,000 20,000 12,000 8,000 50,000 Expected monthly usage 8,000 9,000 7,000 6,000 30,000 1a. Single-atethod sed 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 Mississauga Cambridge Burlington Brantford Total Practical capacity in hours 10,000 20,000 12,000 8,000 50,000 Costs allocated at \$0.30 per \$3,000 \$6,000 \$3,600 \$2,400 \$15,000 hour 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 Cambridge Burlingto Total Mississauga Brantford n Expected monthly usage in hours 8,000 9,000 7,000 6,000 30,000 Costs allocated at \$0.50 per hour \$4,000 \$4,500 \$3,500 \$3,000 \$15,000 Required 2 Assume the dual-rate method is used with separate cost pools for the variable and fixed costs. Variable costs are allocated on the basis of expected monthly usage. Fixed costs are allocated on the basis of practical capacity. What budgeted amounts will be allocated to each manufacturing division? Why might you prefer the dual-rate method? Variable-oools:t 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-Cools:t Total costs in pool = \$9,000 Practical capacity = 50,000 kilowatt hours Allocation rate = \$9,000 ÷ 50,000 = \$0.18 per hour of capacity Mississauga Cambridge BurlingtonBrantfordTotal Variable-cost pool \$0.20 × 8,000; 9,000; 7,000, 6,000 \$1,600 \$1,800 \$1,400 \$1,200 \$ 6,000 Fixed-cost pool \$0.18 × 10,000; 20,000; 12,000, 1,800 3,600 2,160 1,440 9,000 8,000 \$3,400 \$5,400 \$3,560 \$2,640 \$15,000 Total 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. In Class #14.2 Required 1 Allocate the two support divisions` costs to the two operating divisions using the following methods: a. Direct method b. Step-down method (allocate AS first) c. Step-down method (allocate IS first) d. Reciprocal method using linear equations and then repeated iterations. 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 \$10,1200\$00,880,000 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 \$\$10,090,010,910,000 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 \$10,1680\$00,832,000 d. Support Departments OperD aenagrtments AS I S Govt. Corp. Costs \$600,000 \$2,400,000 Alloc. of AS costs (0.25, 0.40, 0.35) (861,538) 215,385 \$ 344,615 \$ 301,538 Alloc. of IS costs 784,616 1,569,231 (0.10, 0.30, 0.60) 261,538 (2,615,385) \$ 0 \$ 0 \$1,129,231 \$1,870,769 In Class #14.2, continued Reciprocal Method Computation AS = \$600,000 + 0.10 IS IS = \$2,400,000 + 0.25AS IS = \$2,400,000 + 0.25 (\$600,000 + 0.10 IS) = \$2,400,000 + \$150,000 + 0.025 IS \$2,550,0000.975IS IS = \$2,550,000 ÷ 0.975 \$2,615,385 AS = \$600,000 + 0.10 (\$2,615,385) = \$600,000 + \$261,538 \$861=,538 d. continued Support Departments OperDatengrtments AS I S Govt. Corp. Costs \$600,000 \$2,400,000 1 Allocation of AS (0.25, 0.40, 0.35) (600,000) 150,000 \$ 240,000 \$ 210,000 2,550,000 st 1 Allocation of IS nd.10, 0.30, 0.60) 255,000 (2,550,000) 765,000 1,530,000 2 Allocation of AS (0.25, 0.40, 0.35) (255,000) 63,750 102,000 89,250 2 Allocation of IS (0.10, 0.30, 0.60) 6,375 (63,750) 19,125 38,250 3rd Allocation of AS (0.25, 0.40, 0.35) (6,375) 1,594 2,550 2,231
More Less

Related notes for ACCTG424

OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.