Ardvark Industries Has Two Production Departments,Assembly and Finishing and Three

question 72

Essay

Ardvark Industries has two production departments,Assembly and Finishing and three Service Departments,Personnel,Maintenance,and Cafeteria.Data relevant to Ardvark are: $$\begin{array} { | l | r | r | r | r | r | r | } \hline \text { Dept } & \begin{array} { r } \text { Direct } \\\text { Cost }\end{array} & \text { Persomel } & \text { Maintenance } & \text { Cafeteria } & \text { Assembly } & \text { Finishing } \\\hline \text { Personnel } & \$ 500,000 & & 0.10 & & 0.70 & 0.20 \\\hline \text { Maintenance } & 420,000 & & & & 0.80 & 0.20 \\\hline \text { Cafeteria } & 200,000 & 0.20 & 0.20 & & 0.30 & 0.30 \\\hline \text { Finishing } & 150,000 & & & & & \\\hline \text { Assembly } & 380,000 & & & & & \\\hline\end{array}$$
Required:
Allocate the service department costs of Ardvark Industries using the step-method of cost allocation.

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Definitions:

Residual Income

The amount of net income an entity generates beyond its required rate of return on its investments.

Invested Assets

Assets that a company or individual allocates resources toward with the expectation of generating a future benefit or income.

Maximum Return

The highest possible profit or gains that can be achieved from an investment or business venture.

Income From Operations

The profit realized from a business's ongoing operations, excluding any income derived from investments or extraordinary one-time events.