TASK II (15 points)________________________________________________________________________

Harry was provided with the following indirect cost information relating to Hogwarts Inc for the year to 31 March 2020:

Cost center: $

Production 1: indirect expenses (to units) 20000

Production 2: indirect expenses (to units) 12000

Service Cost Center A: allocated expenses 17000

Service Cost Center B: allocated expenses 7000

Service Cost Center C: allocated expenses 2000

The estimated benefit provided by service cost centers to the other cost centers is as follows:

Service cost center A: Production 1 55%; Production 2 35%; Service cost center B 5%; Service cost center C 5%.

Service cost center B: Production 1 75%; Production 2 20%; Service cost center C 5%.

Service cost center C: Production 1 55%; Production 2 45%

Required:

a) Using your own words, briefly explain what a production cost center is. Cite your sources.

b) Using your own words, briefly explain what a service cost center is. Cite your sources.

c) Using your own words, briefly explain three ways that service center costs may be charged to other cost centers. Cite your sources.

d) Using your own words, briefly explain what is meant by reciprocal service costs and indicate three ways to deal with them.

e) Calculate the total amount of overhead to be charged to cost center units for both Production cost

center 1 and Production cost center 2 for the year to 31 March 2020. Show your work.