Jake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way...

 

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Jake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production activities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenance costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information regarding the activities is provided in the following table: Cutting 20 176 Number of service calls Machine hours Asset value Maintenance 17 89 $200,000 $25,000 Security 20 88 $80,000 $42,500 Mining 60 182 $300,000 $160,000 $300,000 $95,000 Department cost 1. Is the process of allocating maintenance costs based on machine hours correct? Identify the measure than can possibly be used to allocate the maintenance costs. No ✓ Measures that can possibly be used to allocate the maintenance costs. 2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services method and the most appropriate cost driver for Maintenance. Maintenance cost allocation Security cost allocation Production activities total costs Particulars Maintenance cost $ $ 3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated from each support activity to the other activities. $ Maintenance Security Mining Cutting Department Department Department Department Security cost Production activities total cost $ Mining X Department BE Cutting X Department 18,750 ✓ $ 6,250 21,250 $ 21,250 $ $ Jake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production activities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenance costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information regarding the activities is provided in the following table: Cutting 20 176 Number of service calls Machine hours Asset value Maintenance 17 89 $200,000 $25,000 Security 20 88 $80,000 $42,500 Mining 60 182 $300,000 $160,000 $300,000 $95,000 Department cost 1. Is the process of allocating maintenance costs based on machine hours correct? Identify the measure than can possibly be used to allocate the maintenance costs. No ✓ Measures that can possibly be used to allocate the maintenance costs. 2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services method and the most appropriate cost driver for Maintenance. Maintenance cost allocation Security cost allocation Production activities total costs Particulars Maintenance cost $ $ 3. Assume Jake's Gems is considering cutting costs by switching to a simpler support activity cost allocation method. Determine the total costs allocated from each support activity to the other activities. $ Maintenance Security Mining Cutting Department Department Department Department Security cost Production activities total cost $ Mining X Department BE Cutting X Department 18,750 ✓ $ 6,250 21,250 $ 21,250 $ $

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Jakes Gems Answer 2 Reciprocal Method Maintenance Security Mining Cutting Total Number of Service Ca... View the full answer