Logan Products has two production departments—assembly and finishing. These are supported by two service departments—sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Total Labor Hours Used by Departments Sourcing Operations Assembly Finishing Sourcing - 20,000 40,000 60,000 Operations 10,000 - 60,000 50,000 The costs incurred in the plant are as follows: Departments Departmental Costs Sourcing $ 177,000 Operations 225,000 Assembly 418,000 Finishing 263,000 Total $ 1,083,000 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method?
Logan Products has two production departments—assembly and finishing. These are supported by two service departments—sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments.
Total Labor Hours Used by Departments
Sourcing Operations Assembly Finishing
Sourcing - 20,000 40,000 60,000
Operations 10,000 - 60,000 50,000
The costs incurred in the plant are as follows:
Departments Departmental Costs
Sourcing $ 177,000
Operations 225,000
Assembly 418,000
Finishing 263,000
Total $ 1,083,000
1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method?
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