Goldratt Quant Methods Inc., provides advice on optimal production planning to small manufacturing firms. It has two types of advisers in its pay roll: Experts and Juniors. The company's cost system has two direct cost categories, namely the salaries and benefits of the two types of advisers. The company's cost system also accumulates indirect costs into four distinct cost pools. These cost pools and the budgeted costs in these pools for 2017 are given below: Computing Support (CS) $ 1,800,000 Administrative Support (AS) 800,000 Experts Support (ES) 500,000 (E.g.,Experts-specific secretarial support costs) Juniors Support (JS) 450,000 (E.g., Training costs for the Juniors) The following table gives details on support expected to be provided by the first stage indirect cost pools (CS and AS) to other first stage indirect cost pools as well as the second stage pools. The second-stage pools (ES and JS) do not exchange services with each other. Allocation Base CS AS ES JS CS Server Storage TeraBytes --- 200 300 400 AS Employees 20 --- 45 35 Required: (The questions are independent) Goldratt uses the step-down method to allocate the costs of CS and AS, in that order (i.e., CS first and AS next) to ES and JS.

What will be the total support costs in the ES and JS pools, respectively, after the allocation of the costs of CS and AS to ES and JS is fully completed? Denote the “true” costs of the computing and administrative support departments as CS and AS, respectively. Set up the two equations under the reciprocal method that can help calculate these “true” costs. You don’t have to solve them. Just set them up.

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StepDown method to allocate the budgeted costs Amount ... View the full answer