Bolton Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated on...

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Finance

Bolton Corp has two service departments, Maintenance andPersonnel. Maintenance Department costs of $300,000 are allocatedon the basis of budgeted maintenance-hours. Personnel Departmentcosts of $100,000 are allocated based on the number of employees.The costs of operating departments A and B are $160,000 and$240,000, respectively. Data on budgeted maintenance-hours andnumber of employees are as follows:
Support Departments
Production Departments
Maintenance Department
Personnel Department
A
B
Budgeted costs
$300,000
$100,000
$160,000
$240,000
Budgeted maintenance-hours
NA
800
1,200
600
Number of employees
50
NA
200
600
Under full reciprocal method, what is the total cost ofDepartment B after allocation of service department costs? (Roundup ratios to the 4^th decimal point, and $ amount to the2nd decimal point )
Question 1 options:
$444,991.63
$450,151.98
$379,830.00
$210,151.98

Answer & Explanation Solved by verified expert

4.2 Ratings (887 Votes)

Maintenance

personnel

% of allocation of maintenance (800+1200+600=2600)

800/2600= 30.77%

1200/2600

46.15%

600/2600=23.08%

% of allocation of personnel(50+200+600=850)

50/850= 5.88%

200/850=23.53%``

600/850= 70.59%

let the total cost of maintenance department be "X" and that of personnel be Y

X = 300000+ .0588 Y [Equation1 ]

Y= 100000 + .3077 X

putting the value of equation 1

Y =100000+.3077 [300000+.0588Y]

= 100000+ 92310+ .018093 Y

Y -.018093 Y = 192310

.981907 Y = 192310

Y = 192310/.98190

= 195854.98 (rounded to 195855)

X =300000+ (.0588*195855)

= 300000 + 11516

= 311516

	B
Direct cost	240000
allocation from maintenance [311516*23.08%)	71897.89
allocation from personnel (195855*70.59%)	138254.04
Total cost	450151.93

correct option is "B" -450151.98

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Transcribed Image Text

Bolton Corp has two service departments, Maintenance andPersonnel. Maintenance Department costs of $300,000 are allocatedon the basis of budgeted maintenance-hours. Personnel Departmentcosts of $100,000 are allocated based on the number of employees.The costs of operating departments A and B are $160,000 and$240,000, respectively. Data on budgeted maintenance-hours andnumber of employees are as follows:Support DepartmentsProduction DepartmentsMaintenance DepartmentPersonnel DepartmentABBudgeted costs$300,000$100,000$160,000$240,000Budgeted maintenance-hoursNA8001,200600Number of employees50NA200600Under full reciprocal method, what is the total cost ofDepartment B after allocation of service department costs? (Roundup ratios to the 4th decimal point, and $ amount to the2nd decimal point )Question 1 options:$444,991.63$450,151.98$379,830.00$210,151.98

	Support Departments		Production Departments
	Maintenance Department	Personnel Department	A	B
Budgeted costs	$300,000	$100,000	$160,000	$240,000
Budgeted maintenance-hours	NA	800	1,200	600
Number of employees	50	NA	200	600