Murray Hill was preparing the monthly report that allocates the three service departments ( A, B, and
Question:
Service Department Service Departments Own Cost
A.............. $ 600,000
B .............. 300,000
C .............. 200,000
The following table provides the percentage of utilization of each service department by the other service departments and the operating departments:
The step- down sequence is A, B, then C. Poor Murray allocated only As costs before the donut did him in. His incomplete spreadsheet is:
Required:
a. Do Murray proud and complete the incomplete spreadsheet. Like Murray, round all cost allocations to the nearest dollar.
b. If the company wants the cost allocations to most accurately capture the opportunity cost of resources consumed by the operating divisions, how should the service departments be ordered in the step- downmethod?
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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Related Book For
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman
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