Question: Using the reciprocal method spreadsheet shown in Exhibit show the

Using the reciprocal method spreadsheet (shown in Exhibit), show the costs allocated to production for Steamco Corporation. Use the data in Problem 11-49.
In Problem 11-49, Steamco Corporation is reviewing its operations to see what additional energy-saving projects it might adopt. The company's manufacturing plant generates its own electricity using a process capturing steam from its production processes. A summary of the use of service departments by other service departments as well as by the two producing departments at the plant follows:


Direct costs (in thousands) in the various departments follow:
Department Direct costs
Steam Generation (S1) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 210
Electric Generating:
Fixed costs (S2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Variable costs (S3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
Equipment Maintenance (S4) . . . . . . . . . . . . . . . . . . . . . . 144
Production
Alpha (P1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800
Beta (P2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,320
Steamco currently allocates costs of service departments to production departments using the step method. The local power company indicates that it would charge $480,000 per year for the electricity that Steamco now generates internally. Management rejected switching to the power company on the grounds that its rates would cost more than the $330,000 ($90,000 + $240,000) cost of the present, company-owned,system.


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  • CreatedDecember 18, 2013
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