Exercise $11-28($Algo$)$ Cost Allocation: Step Method $($LO $11-1)$

Mack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair and Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for the month of March follow:

Proportion of Services Used by

Department Direct Costs Repair Quality Control Fabricating Finishing

Fabricating $ $135,600$

Finishing $100,200$

Repair $42,90000\mathrm{.}20\mathrm{.}60\mathrm{.}2$

Quality Control $80,1000\mathrm{.}800\mathrm{.}10\mathrm{.}1$

Required:

Use the step method to allocate the service costs, using the following:

The order of allocation starts with Repair.

The allocations are made in the reverse order $($starting with Quality Control$).$

Mack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair and Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for the month of March follow:

$\backslash$

table

$[[$

Department

$,$

Direct Costs,Proportion of Services Used by

$]$

$,$

$[$

Repair

$,$

$\backslash$

table

$[[$

Quality

$]$

$,$

$[$

Control

$]]$

$,$

Fabricating,Finishing

$]$

$,$

$[$

Fabricating

$,$

$

$140$

$,$

$600$

$,$

$,$

$,$

$,$

$]$

$,$

$[$

Finishing

$,$

$98$

$,$

$200$

$,$

$,$

$,$

$,$

$]$

$,$

$[$

Repair

$,$

$42$

$,$

$000$

$,$

$0$

$,$

$0\mathrm{.}3$

$,$

$0\mathrm{.}4$

$,$

$0\mathrm{.}3]$

$,$

$[$

Quality Control,

$78$

$,$

$400$

$,$

$0\mathrm{.}3$

$,$

$0$

$,$

$0\mathrm{.}2$

$,$

$0\mathrm{.}5]]$

Required:

Use the step method to allocate the service costs, using the following:

a

$.$

$$The order of allocation starts with Repair.

b

$.$

$$The allocations are made in the reverse order

$($

starting with Quality Control

$)$

$.$

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There are $2$ steps to solve this one.

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Step $1$

Introduction:

The cost is allocated among departments using different methods such as direct, reciprocal and step methods.

Explanation:

Using the step method, the costs are allocated among the departments sequentially.

Step $2$

Solution:

Part a$.$

Cost allocation

Repair

Quality control

Fabricating

Finishing

Service department costs

$$42,000$

$$78,400$

Cost allocation:

Repair $(3$:$4$:$3)$

$(42,000)$

$12,600$

$$16,800$

$$12,600$

Quality control $(2$:$5)$

$(91,000)$

$26,000$

$65,000$

Total costs

$0$

$$42,800$

$$77,600$

Part b$.$

Cost allocation

Repair

Quality control

Fabricating

Finishing

Service department costs

$$42,000$

$$78,400$

Cost allocation:

Quality control $(3$:$2$:$5)$

$23,520$

$(78,400)$

$$15,680$

$$39,200$

Repair $(4$:$3)$

$(65,520)$

$37,440$

$28,080$

Total costs

$$53,120$

$$67,280$

Answer

The detailed solution has been provided under step $2.$

This above solution is great, I just simply dont understand how they got the values for the Quality Control Fabricaiong and Finishing in Required A and the Repair Fabricating and Finishing.