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[LO 7-3] Departmental Cost Allocation Logan Products has two production departmentsassembly and finishing. These are...

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Accounting

[LO 7-3]

Departmental Cost Allocation Logan Products has two production departmentsassembly and finishing. These are supported by two service departmentssourcing (purchasing and handling of raw materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments.

Total Labor Hours Used by Departments
Sourcing Operations Assembly Finishing
Sourcing 20,000 40,000 60,000
Operations 10,000 60,000 50,000

The costs incurred in the plant are as follows:

Departments Departmental Costs
Sourcing $165,000
Operations 205,000
Assembly 410,000
Finishing 255,000
Total $1,035,000

Page 247

Required Use 4 or more decimal places (e.g., 33.3333%) in your calculations.

What are the costs allocated to the two production departments using (a) the direct method, (b) the step method (with the sourcing department going first), and (c) the reciprocal method?

What are the total costs in the production departments after allocation?

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