CHAPTER 17 Allocation of Support Activity Costs and Joint Costs

( For 17-15 and 17-16, these solutions are arrived when budgeted costs for Library and Computing Services are $ 600,000 and $ 240,000 , instead of $ 750,000 and $ 320,000 )

Exercise 17-15 1. Cost allocation using direct method: Liberal Arts = $ 450,000 Sciences = $ 390,000 Grand Total = $ 840,000

Exercise 17-16 1. Cost allocation using step-down method Liberal Arts = $ 460,800 Sciences = $ 379,200 Total Cost = $ 840,000

Exercise 17-17 Deposit = $ 237,000 Loan = $ 145,500 Grand Total = $ 382,500

Exercise 17-18 Deposit = $ 235,800 Loan = $ 146,700 Total Cost = $ 382,500

Exercise 17-20 (Using $ 30,000 instead of $ 60,000 as Joint Cost as given in the book, for Prob. 17-20, 17-21 and 17-22)) Allocation of Joint Cost $ 18,000 and $ 12,000

Exercise 17-21 (When Sales Price is 2 and 2.50 instead of 1.50 and 3 as given in the book) $ 16350 and $ 13650

Exercise 17-22 ** Unable to verify book figures with the solution manual.

Exercise 17-23 b) Cost allocation using the reciprocal-services method Deposit = $ 238,431 Loan = $ 144,069

Exercise 17-24 1. Direct method Machining = $ 480,944 Assembly = $ 349,056 (Here, total Cost for HR is $ 250,000 and all other costs are same as that given in the book) 2. Sequence 1st = HR 2nd = Maintenance 3rd = CAD

3. Step Down Method: HR = $ 250,000 Maintenance = $ 242,500 CAD = $ 377,656

Exercise 17-25 1. a. $97,055 + $82,945 = $180,000 b. $422,353 + $227,647 = $650,000 (Here fixed cost for HR is $ 200,000 and all other costs remain unchanged) c. Total Cost = $ 519408 and $ 310592, thus making a total of $ 830000 (Total cost for HR is $ 250000 instead of $ 180000)

2. Sequence 1st = HR

2nd = Maintenance 3rd = CAD 3. a. $99,336 + $80,664 = $180,000 b. $434,800 + $215,200 = $650,000 (Here fixed cost for HR is $ 200,000 and all other costs remain unchanged) c. Total Cost = $ 534136 and $ 295864, thus making a total of $ 830000 (Total cost for HR is $ 250000 instead of $ 180000)

Exercise 17-26 1. Direct method Total service department costs allocated: Etching Finishing DLH Etching = $ 40000 Finishing = $ 160000 Overhead Rate per Hour Etching = $ 10.602 Finishing = $ 2.462 2. Step down method Total service department costs allocated: Etching = $ Finishing DLH Etching = $ 40000

$224,083 $73,917

Finishing = $ 160000

Overhead Rate per Hour Etching = $9.647 Finishing = $ 2.70 Exercise 17-27 1. The joint cost allocated to CBL is $180,000
2. The joint cost allocated to MSB is $75,000.

3. $ 75000, $ 225000 Cost per unit = $ 5.31 (rounded) 4. The contribution would decrease by $80,000 if the mine support braces are not processed further

Problem 17-28 1. Plantwide overhead rate $ 20.55 per DLH 2. a. $ 2880, $ 800, $ 320 b. $ 32760, $ 23760, $ 25680 c. $ 37.44 (MH) $ 11.88 (DLH), $ 17.12 (DLH)

Problem 17-29 1. $ 818,550 545,700 335,750 $1,700,000

(The figure should be $ 1,400,000 instead of $ 1,700,000 as joint cost)

2. Total cost Cost per gallon (rounded) ........................ (The figure should be $ 1,400,000 instead of $ 1,700,000 as joint cost) $1,692,550 $2.42 $1,361,700 $3.89 $395,750 $2.33

Biondi Industries should sell PST-4 at the split-off point Per gallon gain (loss) of further processing = $ (.13)

Problem 17-30 1. $15000 and $ 9000 2. $ 60000 3. $ 37800, $ 12000, $ 10200

Problem 17-31 2. Inventory Value VX-4 = $ 24300 , HD-10 = $ 123500 3. Xian Chemicals should continue to process HD-10 beyond the split-off point, since the incremental revenue is $.50 greater per gallon than the incremental cost.

Problem 17-32

1. The joint cost allocated to Compod is $150,000. 2. The joint cost allocated to Ultrasene is $130,000. 3. A. Additional processing costs have no effect on the physical-units method of allocation. The joint cost allocated to Ultrasene is $100,000, as calculated in requirement (1). B. Net-realizable-value method: The joint cost allocated to Compod is $142,500.

4. Incremental loss per gallon from further processing into Compodalene = $ (.06) Conclusion: Do not process Compod into Compodalene 6.It is preferable to sell Compod than to sell Compodalene. Contribution to the joint production cost, fixed costs, and profit = $ 1.84 Problem 17-33

Service department costs allocated to Etching ............... Service department costs allocated to Finishing ............ Overhead rate per hour (total overhead DLH) Etching = $ 9.80 Finishing = $ 2.663

$192,000 106,000

Problem 17-34

1. $29,705 + $56,797 = $86,502; differs from the total variable cost ($86,500) because of cumulative rounding error. 2. $111,582 + $151,918 = $263,500 3. $141287 + $208715 = $350002 Differs from the total cost to be allocated ($350,000) due to cumulative rounding error in the allocation of the variable costs. Problem 17-35 1. $ 264600 2. $ 52,000 $ 31,000 $ 17,000 Total = $ 1,00,000 3. $ 30160 $ 17980 $ 9860 Problem 17-36 1. Total Joint Cost = $ 2,10,000 for a 10,000 batch 2. a. $ 168,000 + $ 42000 = $ 210000 b. $ 140000 + $ 70000 = $ 210000 c. $ 126000 + $ 84000 = $ 210000 3. Conclusion: The Kryptite should not be processed further into Omega. Incremental loss per pound = $ (11)