Answered Essay: Problem: Magee Engineering (Service Department Cost Allocation) Budgeted cost data for the production and service departme

Problem: Magee Engineering (Service Department Cost Allocation) Budgeted cost data for the production and service departments of Magee Engineering are as follows:

Machining $ 400,000

Assembly 200,000

Plant Maintenance 600,000

Information Systems 116,000

Total $1,316,000

Of its 8,000 budgeted direct labor hours, Plant Maintenance plans to spend 1,600 direct labor hours furnishing service to Information Systems, 2,400 direct labor hours for Machining, and 4,000 for Assembly. Of its 2,000 hours of budgeted computer time, Information Systems plans to spend 200 computer hours on work for Plant Maintenance, 1,600 computer hours for Machining, and 200 computer hours for Assembly.

Required: (1) Determine the costs allocated to the production departments using the direct method and the reciprocal method

Expert Answer

 

A)Allocation under Direct method:

Service department Total hours for allocation Production department
Machining Assembly
Direct cost 400000 200000
Plant Maintenance [600000/6400=$ 93.75] 2400+4000=6400 2400*93.75=$ 225000 4000*93.75= $ 375000
Information Systems [116000/1800 =$ 64.44444] 1600+200 = 1800 64.44444*1600=$ 103111 64.44444*200=$ 12889
Total 728111 587889

reciprocal method:Let total information system cost be X,and total plant maintenance cost be y

Total plant maintenance cost =Direct cost + allocation from information system department cost

y    = 600000 +[x*200/2000]

y= 600000+ .10 x          [equation 1 ]

Total information cost :X = 116000+ [y*1600/8000]

x = 116000+ .20 y

putting the value of y from equation 1 to this equation

x = 116000+ .20[600000+.10x]

= 116000+ 120000+.02x

x-.02x = 236000

.98x = 236000

x(total information system cost] = 236000/.98 =$ 240816

Total plant maintenance cost :600000+.10(240816)

= 600000+ 24082

= $ 624082

Allocation:

Production
Machining Assembly
Direct cost 400000 200000
Plant Maintenance [624082/8000= $ 78.01025] 2400*78.01025= $ 187225 4000*78.01025=$ 312041
Information system [240816/2000=$120.408] 1600*120.408=$ 192653 200*120.408=$ 24081
Total 779878 536122
Buy Essay
Calculate your paper price
Pages (550 words)
Approximate price: -

Help Me Write My Essay - Reasons:

Best Online Essay Writing Service

We strive to give our customers the best online essay writing experience. We Make sure essays are submitted on time and all the instructions are followed.

Our Writers are Experienced and Professional

Our essay writing service is founded on professional writers who are on stand by to help you any time.

Free Revision Fo all Essays

Sometimes you may require our writers to add on a point to make your essay as customised as possible, we will give you unlimited times to do this. And we will do it for free.

Timely Essay(s)

We understand the frustrations that comes with late essays and our writers are extra careful to not violate this term. Our support team is always engauging our writers to help you have your essay ahead of time.

Customised Essays &100% Confidential

Our Online writing Service has zero torelance for plagiarised papers. We have plagiarism checking tool that generate plagiarism reports just to make sure you are satisfied.

24/7 Customer Support

Our agents are ready to help you around the clock. Please feel free to reach out and enquire about anything.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

HOW OUR ONLINE ESSAY WRITING SERVICE WORKS

Let us write that nagging essay.

STEP 1

Submit Your Essay/Homework Instructions

By clicking on the "PLACE ORDER" button, tell us your requires. Be precise for an accurate customised essay. You may also upload any reading materials where applicable.

STEP 2

Pick A & Writer

Our ordering form will provide you with a list of writers and their feedbacks. At step 2, its time select a writer. Our online agents are on stand by to help you just in case.

STEP 3

Editing (OUR PART)

At this stage, our editor will go through your essay and make sure your writer did meet all the instructions.

STEP 4

Receive your Paper

After Editing, your paper will be sent to you via email.