The Maintenance Department Has Been Servicing Gizmo Production for Four

question 88

Essay

The Maintenance Department has been servicing Gizmo Production for four years.Beginning next year,the company is adding a Scrap-Processing Department to recycle the materials from Gizmo Production.As a result,maintenance costs are expected to increase from $480,000 per year to $500,000 per year.The Scrap-Processing Department will use 25% of the maintenance efforts.
Required:
a.Using the stand-alone cost-allocation method,identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.
b.Using the incremental cost-allocation method,identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.
c.What is the difference between the two methods that would affect Scrap-Processing Department?

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Definitions:

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The process by which a consumer decides whether or not to purchase a product or service, often influenced by factors such as need, desire, and budget.

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