Managerial Accounting
16th Edition
ISBN: 9781259995484
Author: Ray Garrison
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 4.B, Problem 7C
CASE 4B-7 Step-Down Method versus Direct Method LO4-10, LO4-11
"This is really an odd situation,' said Tim Carter, mil manager of Highland Publishing Company. “We get most of the jobs we bid on that require a lot of press time in the Printing Department, yet profits on those jobs are never as high as they ought to be. On the other hand, we lose most of the jobs we bid on that require a lot of time m the Binding Department. I would be inclined to think that the problem is with our
Highland Publishing Company is a large organization that offers a variety of printing and binding work. The Printing and Building departments are supported by three service departments. The costs of these service departments are allocated to other departments in the order listed below. The Personnel cost is allocated based on number of employees. The Custodial Services cost is allocated based on square feet of space occupied and the Maintenance cost is allocated based on machine-hours.
| Department | TotalLabor-Hours | Square Feet of Space Occupied | NumberofEmployees | Machine-Hours | DirectLabor-Hours |
| Personnel | 20,000 | 4,000 | 10 | ||
| Custodial Services | 30,000 | 6,000 | 15 | ||
| Maintenance | 50,000 | 20,000 | 25 | ||
| Printing | 90,000 | 80,000 | 40 | 150,000 | 60,000 |
| Binding | 260,000 | 40,000 | 120 | 30,000 | 175,000 |
| 450,000 | 150,000 | 210 | 180,000 | 235,000 |
Budgeted overhead costs in each department for the current year are shown below:
Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating departments.
Required:
- Using the step-down method, allocate the service department costs to the consuming departments. Then compute predetermined overhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department and direct labor-hours as the allocation base in the Binding Department.
- Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding departments.
- Assume that during the current year the company bids on a job that requires machine and labor time as follows:
1 The reciprocal method can also be used to allocate service department costs to operating departments. However, this method requires the use of simultaneous linear equations that are beyond the scope of this book.
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Chapter 4 Solutions
Managerial Accounting
Ch. 4.A - EXERCISE 4A-1 Computation of Equivalent Units of...Ch. 4.A - EXERCISE 4A-2 Cost per Equivalent Unit-FIFO Method...Ch. 4.A - EXERCISE 4A-3 Assigning Costs to Units-FIFO Method...Ch. 4.A - EXERCISE 4A-4 Cost Reconciliation Report-EIFO...Ch. 4.A - EXERCISE 4A-5 Computation of Equivalent Units of...Ch. 4.A - EXERCISE 4A-6 Equivalent Units of Production-FIFO...Ch. 4.A - EXERCISE 4A-7 Equivalent Units of Production and...Ch. 4.A -
EXERCISE 4A-8 Equivalent Units of Production—FIFO...Ch. 4.A - EXERCISE 4A-9 Equivalent Units; Equivalent Units...Ch. 4.A - PROBLEM 4A-10 Equivalent Units of Production;...
Ch. 4.A - Prob. 11PCh. 4.A - Prob. 12CCh. 4.B - Prob. 1ECh. 4.B - EXERCISE 4B-2 Step-Down Method LO4-11 Madison Park...Ch. 4.B - Prob. 3ECh. 4.B - EXERCISE 4B-4 Direct Method LO4-10 Refer to the...Ch. 4.B - PROBLEM 4B-5 Step-Down Method L04-11 Woodbury...Ch. 4.B - PROBLEM 4B-6 Step-Down Method versus Direct...Ch. 4.B - CASE 4B-7 Step-Down Method versus Direct Method...Ch. 4 - Prob. 1QCh. 4 - In what ways are job-order and process costing...Ch. 4 - Why is cost accumulation simpler in a process...Ch. 4 - How many Work in Process accounts are maintained...Ch. 4 - Prob. 5QCh. 4 - Prob. 6QCh. 4 - Prob. 7QCh. 4 - Prob. 8QCh. 4 - Prob. 1AECh. 4 - This exercise relates to the Double Diamond Skis’...Ch. 4 - This exercise relates to the Double Diamond Skis’...Ch. 4 - Clopack Company manufactures one product that goes...Ch. 4 - Clopack Company manufactures one product that goes...Ch. 4 - Clopack Company manufactures one product that goes...Ch. 4 - Clopack Company manufactures one product that goes...Ch. 4 - Clopack Company manufactures one product that goes...Ch. 4 -
Clopack Company manufactures one product that...Ch. 4 -
Clopack Company manufactures one product that...Ch. 4 -
Clopack Company manufactures one product that...Ch. 4 - Clopack Company manufactures one product that goes...Ch. 4 - Prob. 10F15Ch. 4 - Prob. 11F15Ch. 4 - Prob. 12F15Ch. 4 -
Clopack Company manufactures one product that...Ch. 4 - Prob. 14F15Ch. 4 - Prob. 15F15Ch. 4 - Prob. 1ECh. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - EXERCISE 4-4 Assigning Costs to...Ch. 4 - EXERCISE 4-5 Cost Reconciliation...Ch. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 -
EXERCISE 4-9 Equivalent Units and Cost per...Ch. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Prob. 13PCh. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - PROBLEM 4-16 Comprehensive...Ch. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Prob. 19CCh. 4 - (
CASE 4-20 Ethics and the Manager, Understanding...
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