Sunshine Juice Company produces and distributes concentrated orange juice. It has been operating in two key...

  

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Sunshine Juice Company produces and distributes concentrated orange juice. It has been operating in two key customer segments for years, selling to institutional customers and retail customers. The production departments are supported by the following three services: Administrative, Information Systems, and Maintenance. To date, the accounting team has simply allocated the support costs evenly between the two operating segments in order to determine total costs. Realizing that there are more accurate ways of assigning these costs, the new controller has asked you to prepare support department cost allocations using three other (and arguably more accurate) methods. Financial information is as follows. Original costs Proportion of Administrative hours used Proportion of Information Systems hours used Proportion of Maintenance hours used Administrative $75,000 0.20 0.10 Support Departments Information Systems $110,000 0.10 0.10 Maintenance $60,000 0.10 0.10 Operating Segments Institutional $650,000 $350,000 0.45 0.40 Retail 0.30 0.35 0.30 0.50 (b) Your answer is incorrect. Determine the total costs that each operating segment would be accountable for if the step method is used to allocate support costs; assume support departments are ranked according to their original cost. (Round intermediate calculations to 4 decimal places, e.g. 15.2516 and final answers to 2 decimal places, e.g. 15.25.) Total costs 69 Operating Segments Institutional $ GA Retail Sunshine Juice Company produces and distributes concentrated orange juice. It has been operating in two key customer segments for years, selling to institutional customers and retail customers. The production departments are supported by the following three services: Administrative, Information Systems, and Maintenance. To date, the accounting team has simply allocated the support costs evenly between the two operating segments in order to determine total costs. Realizing that there are more accurate ways of assigning these costs, the new controller has asked you to prepare support department cost allocations using three other (and arguably more accurate) methods. Financial information is as follows. Original costs Proportion of Administrative hours used Proportion of Information Systems hours used Proportion of Maintenance hours used Administrative $75,000 0.20 0.10 Support Departments Information Systems $110,000 0.10 0.10 Maintenance $60,000 0.10 0.10 Operating Segments Institutional $650,000 $350,000 0.45 0.40 Retail 0.30 0.35 0.30 0.50 (b) Your answer is incorrect. Determine the total costs that each operating segment would be accountable for if the step method is used to allocate support costs; assume support departments are ranked according to their original cost. (Round intermediate calculations to 4 decimal places, e.g. 15.2516 and final answers to 2 decimal places, e.g. 15.25.) Total costs 69 Operating Segments Institutional $ GA Retail

Answer rating: 100% (QA)

SOLUTION IN DETAILS To allocate support costs using the step method we need to follow these steps Step 1 Rank the support departments according to the... View the full answer