Claremore Electronics, Inc

question 3

Essay

Claremore Electronics, Inc. manufactures gauges for automobile dashboards. The company has two production departments, Molding and Assembly. There are three service departments: Human Resources, Maintenance, and Engineering. Usage of services by the various departments follows.

The budgeted costs in Claremore's service departments are: Human Resources, $180,000; Maintenance, $270,000; and Engineering, $200,000. The company rounds all calculations to the nearest dollar.
Required:
A. Use the direct method to allocate Claremore's service department costs to the production departments.
B. Determine the proper departmental sequence to use in allocating the company's service costs by the step-down method.
C. Ignoring your answer in part "B," assume that Human Resources costs are allocated first, Maintenance costs second, and Engineering costs third. Use the step-down method to allocate Claremore's service department costs.

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Definitions:

Competitive Advantage

A condition or circumstance that puts a company in a favorable or superior business position.

Quantity Discount Model

A pricing strategy where the price per unit of inventory is lowered when purchases exceed certain quantity thresholds, encouraging larger orders.

Acquiring Goods

The process of obtaining products or commodities for use, resale, or further production.

Lot Size

The quantity of a particular product made or purchased at one time, influencing inventory levels and production planning.