Question 1:

Question 2:

Logo Inc, has two data services departments (the Systems Department and the Facilities Department) that provide support to the company's three production departments (Machining Department, Assembly Department, and Finishing Department). The overhead costs of the Systems Department are allocated to other departments on the basis of computer usage hours. The overhead costs of the Facilities Department are allocated based on square feet occupied (in thousands). Other information pertaining to Logo is as follows. If Logo employs the direct method of allocating service department costs, the overhead of the Systems Department would be allocated by dividing the $200,000 overhead amount by how many computer usage hours? 1,200 hours. 9,300 hours. 9,000 hours. 8,100 hours. Clarendon, Inc. has two production departments, machining and assembly. James Irving, the manager of the assembly department, has noted a concern about the indirect costs allocated to his department, which, based on direct labor hours, seem excessive. He argues that his department is only half the size (in square footage used) of the machining department and uses a small portion of the engineering services and yet he is allocating nearly half of the indirect costs provided by engineering services and occupancy costs. Mr. Irving argues that adopting activity-based costing (ABC), and using multiple cost drivers, would more fairly divide the costs. Assume this data is collected by Mr. Irving: If Clarendon changes to the ABC system recommended, how much would indirect costs change in Mr. Irving's department? $135,000 reduction. $92,000 reduction. $73,000 reduction. $103,000 reduction