Explore BrainMass

Explore BrainMass

    Direct and step-down methods with dual rates (Petro-X)

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    See *ATTACHED* file for complete details!

    Can you help me get started on this assignment?

    --------------------------------

    Petro-X uses the direct method for allocating both fixed and variable costs from the physical plant and equipment maintenance support departments to operating departments X and Y. The bases for allocation are as follows:
    Physical plant:
    Fixed costs on the basis of square feet occupied
    Variable costs on the basis of number of employees
    Equipment maintenance
    Fixed costs on the basis of budgeted machine hours
    Variable costs on the basis of expected maintenance hours

    Costs for physical plant and equipment maintenance are:
    Physical equipment Equipment maintenance
    Fixed costs $39,000 $75,000
    Variable costs $18,000 $60,000

    Allocation bases for all four departments are:
    Support Operating
    Physical plant Equip. Maintenance Department X Department Y
    Square feet 1,600 3,900 5,000 8,000
    Number of employees 10 12 40 50
    Budgeted machine hours 0 100 10,000 15,000
    Budgeted maintenance hours 10 20 200 400

    A. Assign the support department costs to departments X and Y using the direct method
    B. Assign the support department costs to departments X and Y using the step-down method with the physical plant costs allocated first.
    C. Assign the support department costs to departments X and Y using the step-down method with equipment maintenance costs allocated first.
    D. Under the step-down method, what criterion should be used to decide which support department costs to allocate first?

    © BrainMass Inc. brainmass.com June 4, 2020, 12:09 am ad1c9bdddf
    https://brainmass.com/business/cost-allocation-of-service-department-costs/direct-step-down-methods-dual-rates-petro-x-321963

    Attachments

    Solution Preview

    Dear student,
    >> Solution is provided in a separate excel file attached in the following parts. <<

    (a) Table showing Allocation of Service Department costs to Production Departments- Direct Method

    (b) Table showing Allocation of Service Department costs to Production Departments- Step Down Method ...

    Solution Summary

    The direct and step-down methods with dual rates for Petro-X is examined.

    $2.19

    ADVERTISEMENT