Problem 1

Samsung has two operating/user departments, Gen 4 & Gen 5. The two support departments are Information Technology (IT) & Product Development (PD). The costs incurred in each of these departments are as follows:

Gen 4 $300,000

Gen 5 $480,000

IT $60,000

PD $150,000

The actual level of support is as follows:

Supplied by Used by

IT PD Gen 4 Gen 5

IT 10% 30% 60%

PD 20% 25% 55%

Determine thecost allocatedto:

1. Gen 4 using the direct method
2. Gen 5 using the direct method
3. Gen 4 using the step-down method (allocating IT first)
4. Gen 4 using the step-down method (allocating PD first)
5. Gen 4 using the reciprocal method
6. Gen 5 using the reciprocal method

Problem 2

Cotton Elle Inc. produces three varieties of cotton, Grade 1, Grade 2, & Grade 3 from a joint processing of the raw cotton. The amount of each product produced in the first quarter of the current year is 80,000 pounds, 50,000 pounds, and 120,000 pounds respectively. The selling price of each product per pound is $5, $7 & $8 respectively. The joint processing cost is $400,000. The separable processing costs for each product is $30,000, $50,000 and $90,000 respectively.

Determine the following:

1. Joint cost allocated to each product (Grade 1, Grade 2, & Grade 3) using the physical volume method, relative sales value method, and net realizable value method.
2. The unit cost of each product (Grade 1, Grade 2, & Grade 3) using the net realizable value method.