Boston Corporation Has Two Production Departments, Assembly and Machining, and Two

question 76

Essay

Boston Corporation has two production departments, Assembly and Machining, and two service departments, Personnel and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of July, 2020 are as follows:

Required:
Compute the allocation of service department costs to producing departments for July 2020 using the step method.

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Definitions:

Accounts Payable

Money owed by a business to its suppliers shown as a liability on the company’s balance sheet.

Just-in-time

An inventory strategy companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Restrictive Policy

Measures taken by a government or financial institution to limit borrowing and spending in an attempt to curb inflation or stabilize the economy.

Neutral Policy

A stance or policy adopted by an organization or government that is neither supportive nor against a particular issue, aiming for a balanced approach.