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[solution] » Graduate level accounting question, all work must be shown 1. (25 pts.) Adam Corp. alloc


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Graduate level accounting question, all work must be shown


1. (25 pts.) Adam Corp. allocates service department costs to operating departments.

 

Adam has three service departments-Accounting, Janitorial and Maintenance. Adam

 

has two operating departments-Xs and Qs. Accounting Department accumulates annual

 

costs of $250,000, and those costs are allocated using the number of transactions

 

processed by the Accounting Department. The X line and Q line required processing of

 

7,000 and 3,000 transactions respectively. Accounting, Janitorial and Maintenance each

 

required processing of 1,000; 3,000 and 2,000 transactions respectively. Janitorial

 

Department accumulates annual costs of $100,000, and those costs are allocated using

 

the department?s square footage of floor space. The X line and Q line have plant square

 

footage of 4,000 square feet and 11,000 square feet respectively. But Accounting,

 

Janitorial and Maintenance each have floor space of 3,000; 2,000 and 1,000 square feet

 

respectively. Maintenance Department accumulates annual costs of $300,000, and

 

those costs are allocated using the number of maintenance calls made over the year.

 

The X line and Q line made 40 and 60 maintenance calls, respectively, during the year.

 

Accounting, Janitorial and Maintenance made 15, 5, and 10 maintenance calls during

 

the year.

 

a. Allocate service department (accounting and maintenance) costs to operating

 

departments (Product 1, Product 2, and Product 3) using the direct method. b. Allocate service department costs using the step down method (assume

 

Accounting is allocated first, then Janitorial, and then Maintenance). Explain at least two of the key advantages of the step down method relative to the direct method

 

when allocating service department costs to operating departments.

 


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[solution] » Graduate level accounting question, all work must be shown 1. (25 pts.) Adam Corp. alloc.zip

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