Mega Manufacturing
The Mega Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$$\begin{array} { l c c c c }
&\text { Service } &\text { Service } & \text { Producing } & \text { Producing } \
&\text { Dept.1 }&\text { Dept.2 }&1&2\
\hline \text { Department Costs } & \$ 40000 & \$ 30000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 8000 & 4000 & 20000 & 16000 \
\text { Square Feet Occupied } & 3000 & 6000 & 9000 & 12000
\end{array}$$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and square feet occupied, respectively. Service department 1 is allocated first.
-Assuming that Mega Manufacturing Company uses the reciprocal method of allocating service costs,what is the total overhead that will be allocated from service department 1,adjusted for the reciprocal method?

Question

Mega Manufacturing
The Mega Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$$\begin{array} { l c c c c } 
 &\text { Service } &\text { Service } & \text { Producing } & \text { Producing } \
&\text { Dept.1 }&\text { Dept.2 }&1&2\
\hline \text { Department Costs } & \$ 40000 & \$ 30000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 8000 & 4000 & 20000 & 16000 \
\text { Square Feet Occupied } & 3000 & 6000 & 9000 & 12000
\end{array}$$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and square feet occupied, respectively. Service department 1 is allocated first.
-Assuming that Mega Manufacturing Company uses the reciprocal method of allocating service costs,what is the total overhead that will be allocated from service department 1,adjusted for the reciprocal method?

Quizplus · Accepted Answer

To use the reciprocal method, we need to calculate the reciprocal of the service department's allocation percentages. The reciprocal of Service Department 1's allocation percentage (40%) is 2.5. The reciprocal of Service Department 2's allocation percentage (60%) is 1.67.

We can then allocate the costs of each department to the other based on their reciprocal values.

Allocating the costs of Service Department 1 to Service Department 2: 
$30,000 x (1.67/4.17) = $12,000

Allocating the costs of Service Department 2 to Service Department 1: 
$19,000 x (2.5/4.17) = $11,404.78

The total overhead allocated from Service Department 1, adjusted for the reciprocal method, is the sum of the costs allocated to Service Department 2:
$12,000

Therefore, the correct answer is C) $44,304.

Mega Manufacturing the Mega Manufacturing Company Has Two Service Departments

Mega Manufacturing
the Mega Manufacturing Company Has Two Service Departments