Kettle Company manufactures kettles. Kettle Co. has two support departments: Human Resources and Facilities. Kettle Co. has
Question:
Kettle Company manufactures kettles. Kettle Co. has two support departments: Human Resources and Facilities. Kettle Co. has two operating divisions, Copper and Economy. Data for the current year are as follows:
Human Resources $ 120,000 (costs), n/a (employees),1,500 (square footage)
Facilities $ 80,000 (costs), 25 (employees), n/a (square footage)
Copper $ 460,000 (costs), 130 (employees), 3,000 (square footage)
Economy $ 325,000 (costs), 70 (employees), 5,000 (square footage)
Kettle Co. allocates Human Resource costs based on the number of employees and Facilities costs are allocated based square footage.
a. Using the direct method, calculate are the support department costs allocated to the operating departments Copper and Economy, respectively. (round intermediate calc’s to four decimals).
b. Using the percentage of their services rendered to the other support departments, calculate the percentage of support department services rendered and rank the support department to be allocated first when using the step-down method. (round intermediate calc’s to four decimals).
c. Independent of the answer in part b., using the step-down method, what is the allocation of support department costs to the operating departments Copper and Economy respectively, allocating the Facilities department first? (round intermediate calc’s to four decimals).
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello