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Siti's Book and Music Store has two service departments, Warehouse and Data Center

Accounting Dec 25, 2020

Siti's Book and Music Store has two service departments, Warehouse and Data Center. Warehouse Department costs of RM70,000 are allocated on the basis of budgeted warehouse- hours. Data Center Department costs of RM200,000 are allocated based on the number of computer log-on hours. The costs of operating departments Music and Books are RM 142,500 and RM171,000, respectively. Data on budgeted warehouse-hours and number of computer log-on hours are as follows: Production Departments Support Departments Warehouse Data Center Music Department Department Books RM370,000 RM200,000 RM142,500 RM171,000 Budgeted costs Budgeted warehouse- hours NA 590 1000 1600 Number of computer hours 250 NA 860 1010 Using the step-down method, what amount of Data Center Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round intermediary calculations to three decimal places.)

Expert Solution

  Service Departments Operating Deparments    
  Warehouse Departments Data Centre Departments Music Books % of departmetal service
Cost 3,70,000 2,00,000 1,42,500 1,71,000    
budgeted Warehous Hours 0 590 1000 1600 590/(590+1000+1600) 0.1850
Nos od Computer Hours 250   850 1010 250/(250+850+1010) 0.1185
  • as first allocation is to be made based on highest % of service provided to other department wahrehouse department cost will be first allocated....
  •   Service Departments Operating Deparments
      Warehouse Departments Data Centre Departments Music Books
    cost 3,70,000 2,00,000 1,42,500 1,71,000
    allocation of warehouse cost -3,70,000 68,433* 1,15,987* 1,85,580*
      -   2,68,433 2,58,487 3,56,580
    allocation of data centre cost 0 -2,68,433 1,22,671** 1,45,762**
    total balance after allocation of supportive department cost -   -   3,81,158 5,02,342

*

proportion proportion cost to be allocated' allocation
590/(590+1000+1600) 0.184953 $ 3,70,000 $                          68,433
1000/(590+1000+1600) 0.3134796 $ 3,70,000 $                       1,15,987
1600/(590+1000+1600) 0.5015674 $ 3,70,000 $                       1,85,580

**

proportion proportion cost to be allocated' allocation
850/(850+1010) 0.4570 $ 2,68,433 $                       1,22,671
1010/(850+1010) 0.5430 $ 2,68,433 $                       1,45,762

Hence answer to the question is amt of data centre cost allocated to musci department is 122,671.00

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