Buildz Corp Has Been Servicing the Production Casting Department for Five

question 12

Essay

Buildz Corp has been servicing the Production Casting Department for five years. Beginning next year, the company is adding a Production Molding Department to compliment the materials produced by the Production Casting Department. As a result, data center costs are expected to increase from $800,000 per year to $1,000,000 per year. The Production Molding Department will use 20% of the data center efforts.
Required:
a.Using the stand-alone cost-allocation method, identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year.
b.Using the incremental cost-allocation method, identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year.

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Definitions:

Economy

An organized system of production, distribution, and consumption of goods and services within a geographical area.

Circular-Flow Diagram

A model that illustrates the movement of goods and services and money between households and businesses in the economy.

Markets

Places or systems in which parties engage in the exchange of goods, services, or information, driven by supply and demand.

Circular-Flow Diagram

A graphical representation illustrating the flow of funds among households, companies, and the government within an economy.