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The Special Products Manufacturing Company has two service departments manufacturing support and facilities management,...

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Question

Accounting

The Special Products Manufacturing Company has two service departments manufacturing support and facilities management, and two production departments assembly and packing/shipping. The distribution of each service department's efforts to the other departments is shown below:

FROM

TO

Support

Facilities Assembly Pack/Ship

Support 0%

45% 25% 30%

Facilities 30%

0% 30% 40%

The direct operating costs of the departments (including both variable and fixed costs) were as follows:

Manufacturing Support

$ 240,000

Facilities Management

450,000

Assembly

1,200,000

Pack/Ship

225,000

Required: (Calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar.):

  1. Allocate the service department costs to the production departments using the direct method. (10 points)

  2. Allocate the service department costs to the production departments using the step method with the support department going first. (10 points)

  3. Allocate the service department costs to the production departments using the reciprocal method. (10 points)

4. Which is the most preferred method and why? (4 points)

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