Question

1. Carolina Corporation has two production Departments: P1 and P2 and two service departments: S1 and...

1.

Carolina Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows:

 Proportion of Services Used by: Department Direct costs S1 S2 P1 P2 S1 \$ 72,000 0.70 0.10 0.20 S2 \$ 157,000 0.20 0.30 0.50 P1 \$ 214,000 P2 \$ 179,000

Under the direct-method of cost allocation, the amount of S1 costs allocated to P1 would be:

2.

Carolina Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows:

 Proportion of Services Used by: Department Direct costs S1 S2 P1 P2 S1 \$ 78,000 0.70 0.10 0.20 S2 \$ 127,000 0.20 0.30 0.50 P1 \$ 229,000 P2 \$ 217,000

Under the step-method of cost allocation, the amount of costs allocated from S2 to P2 would be:

3. Products X, Y, and Z are produced from the same process at a cost of \$5,200. Five thousand pounds of raw material yields 1,500 X, 2,500 Y, and 1,000 Z. Selling prices are: X \$2 per unit, Y \$4 per unit, Z valueless. The ending inventory of X is 50 units. What is the value of the ending inventory if joint costs are allocated using net realizable value?

1.

Amount of S1 cost allocated to P1 under direct method is = \$72,000*10/30 = \$24,000

2.

Amount of cost allocated from S2 to P2 under step method:

Total cost of S2 department = Direct cost + cost allocated from S1 to S2

Total cost of S2 department = \$127,000+54,600 (78,000*0.70) = \$181,600

Amount of cost allocated from S2 to P2 under step method = \$181,600*30/80 = \$68,100

3.

 Total X Y Z Units produced (in pounds) 5,000 1,500 2,500 1,000 Selling price \$2 \$4 \$0 Sales value (Net realizable value) \$13,000 \$3,000 \$10,000 \$0 Joint cost allocated 5,200 1,200 (5,200*3/13) 4,000 (5,200*10/13) Cost per unit \$0.8 (1,200/1,500) \$1.6 (4,000/2,500) Value of ending inventory of X = 50*\$0.8 = \$40