Hartwicke Manufacturing Company has two service departments - product design and engineering support,and two production departments - assembly and finishing.The distribution of each service department's efforts to the other departments is shown below:
The direct operating costs of the departments (including both variable and fixed costs)were as follows: Design $120,000;Engineering Support $240,000;Assembly $660,000;Finishing $870,000.The total cost accumulated in the finishing department using the step method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Question

Hartwicke Manufacturing Company has two service departments - product design and engineering support,and two production departments - assembly and finishing.The distribution of each service department's efforts to the other departments is shown below: 
The direct operating costs of the departments (including both variable and fixed costs)were as follows: Design $120,000;Engineering Support $240,000;Assembly $660,000;Finishing $870,000.The total cost accumulated in the finishing department using the step method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

Quizplus · Accepted Answer

1. Calculate the allocation ratios for each service department:
- Design to Assembly = 0.25 / 0.75 = 0.3333
- Design to Finishing = 0.75 / 0.25 = 3
- Engineering Support to Assembly = 0.5 / 0.5 = 1
- Engineering Support to Finishing = 0.25 / 0.75 = 0.3333
2. Allocate the costs of each service department to the production departments:
- Design to Assembly = 0.3333 x $120,000 = $40,000
- Design to Finishing = 3 x $120,000 = $360,000
- Engineering Support to Assembly = 1 x $240,000 = $240,000
- Engineering Support to Finishing = 0.3333 x $240,000 = $80,000
3. Calculate the total costs of each production department including the allocated service department costs:
- Assembly = $660,000 + $40,000 + $240,000 = $940,000
- Finishing = $870,000 + $360,000 + $80,000 = $1,310,000
4. Using the step method, allocate the total cost of the Finishing department to the other departments based on their allocation ratios:
- Assembly = 0.75 / 1 = 0.75
- Finishing = 0.25 / 1 = 0.25
- Allocate $1,310,000 x 0.75 = $982,500 to Assembly
- Allocate $1,310,000 x 0.25 = $327,500 to Finishing
5. The total cost accumulated in the finishing department using the step method is $870,000 + $360,000 + $80,000 + $327,500 = $1,637,500, which rounds to $1,052,250 to the nearest dollar. Therefore, the answer is C.

Hartwicke Manufacturing Company Has Two Service Departments - Product Design