Trin Ltd. has two support departments (Support Dept. A and Support Dept. B) and two operating...

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Trin Ltd. has two support departments (Support Dept. A and Support Dept. B) and two operating departments (Operating Dept. A and Operating Dept. B). Support Dept. A's overhead costs are allocated on the basis of standard support hours used whereas the Support Dept. B's overhead costs are allocated based on the number of employees. Costs of Operating Dept. A and B are $120,000 and $180,000, respectively. Data on standard support hours and number of employees are as follows: Budgeted overhead cost Support hours provided by Support Dept. A Budgeted number of employees provided by Support Dept. B Support Dept. A $240,000 27 Support Dept. B $60,000 180 Operating Dept. A $120,000 720 162 Operating Dept. B $180,000 900 351 Required (A) Allocate the support departments' overhead costs to the operating departments using the direct method and compute the total costs of each operating department. (B) Allocate the support departments' overhead costs to the operating departments using the step-down method (Support Dept. A allocating first) and compute the total costs of each operating department. (C) Allocate the support departments' overhead costs to the operating departments using the reciprocal method (either linear equations or repeated iterations) and compute the total costs of each operating department. (D) Which method would you recommend Trin Ltd. adopt and why? Trin Ltd. has two support departments (Support Dept. A and Support Dept. B) and two operating departments (Operating Dept. A and Operating Dept. B). Support Dept. A's overhead costs are allocated on the basis of standard support hours used whereas the Support Dept. B's overhead costs are allocated based on the number of employees. Costs of Operating Dept. A and B are $120,000 and $180,000, respectively. Data on standard support hours and number of employees are as follows: Budgeted overhead cost Support hours provided by Support Dept. A Budgeted number of employees provided by Support Dept. B Support Dept. A $240,000 27 Support Dept. B $60,000 180 Operating Dept. A $120,000 720 162 Operating Dept. B $180,000 900 351 Required (A) Allocate the support departments' overhead costs to the operating departments using the direct method and compute the total costs of each operating department. (B) Allocate the support departments' overhead costs to the operating departments using the step-down method (Support Dept. A allocating first) and compute the total costs of each operating department. (C) Allocate the support departments' overhead costs to the operating departments using the reciprocal method (either linear equations or repeated iterations) and compute the total costs of each operating department. (D) Which method would you recommend Trin Ltd. adopt and why?

Answer rating: 100% (QA)

SOLUTION A Using the direct method we allocate the overhead costs of the support departments directly to the operating departments The total overhead costs of each support department are divided by th... View the full answer