EXERCISE SUPPORT DEPT COSTING

Q1
Raspberries R Us has two operating units (Jam and Jelly) and two support departments (HR
and Accounting). The estimated operating costs and percentages of services used by these
departments are as follows:

Operating
HR Accounting Costs
HR 0% 10% $9,000
Accounting 10% 0% 13,500
Jam 60% 40% 40,000
Jelly 30% 50% 35,000

Instructions
a. Allocate the support department costs to the operating units using the direct method of
allocating costs.
b. Allocate the support department costs to the operating units using the step method of
allocating costs. The departments are ranked based on the highest costs.
c. Which of the two methods would you recommend for Raspberries R Us and why?

Q2
Sloane Memorial operates two support departments and two operating units. Information on
the operations is as follows:

Square Pounds of
Support Departments Costs Feet Laundry
Laundry $60,000 500 1,200
Housekeeping 40,000 250 12,000

Operating Unit
Surgery 250,000 1,000 52,000
ICU 600,000 2,000 26,000

Housekeeping is based on the number of square footage, and laundry is allocated based on
the pounds of laundry. Using the step method, allocate the support department costs to the
operating units if laundry is ranked first. (Do not round intermediary calculations, round your
final answer to the nearest whole dollar.)

Q3
Fauscett Industries has two support departments - industry support and facilities management,
and two operating units - cutting and shipping. The costs and distribution of each support
department efforts to the other departments are as follows
Operating
Support Facilities Costs
Support 0% 15% $200,000
Facilities 35% 0% 450,000
Cutting 20% 40% 980,000
 Shipping 45% 45% 225,000

Allocate the support department costs to the operating units using the reciprocal method. (Do
not round intermediary calculations, round your final answer to the nearest whole dollar.)

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