La Mer Company Manufactures Gauges for Automobile Dashboards The Budgeted Costs in La Mer's Service Departments Are: Human

question 56

Essay

La Mer Company 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. $\begin{array} { lccc } &\text { Human } \\&\underline {\text { Resources } }& \underline {\text { Maintenance }} &\underline { \text { Engineering } }\\ \text { Human Resources } & - - & - - \\\text { Maintenance } & 5 \% & - & - - \\\text { Engineering } & 5 \% & 10 \% & - - \\\text { Molding } & 40 \% & 40 \% & 75 \% \\\text { Assembly } & 50 \% & 50 \% & 25 \%\end{array}$ The budgeted costs in La Mer'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 La Mer'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 La Mer's service department costs.

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Definitions:

Target Payout Ratio

A firm’s long-term desired dividend–earnings ratio.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Price Range

The spread between the lowest and highest prices at which a commodity or asset is traded over a certain period of time.

Compromise Dividend Policy

A strategy for distributing earnings to shareholders that seeks to balance between retaining earnings for reinvestment and paying dividends.