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The Milton Company Has Two Products Product 1 Is Manufactured

The Milton Company has two products and two manufacturing departments. It also has two support departments: materials handling (Department A) and power generation (Department B). The document provides budgeted costs for the support departments and manufacturing departments. It asks to calculate the allocation of support department costs to manufacturing departments using different allocation methods and determine if Milton should accept an outside offer to provide power.

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Amit Pandey
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51 views1 page

The Milton Company Has Two Products Product 1 Is Manufactured

The Milton Company has two products and two manufacturing departments. It also has two support departments: materials handling (Department A) and power generation (Department B). The document provides budgeted costs for the support departments and manufacturing departments. It asks to calculate the allocation of support department costs to manufacturing departments using different allocation methods and determine if Milton should accept an outside offer to provide power.

Uploaded by

Amit Pandey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Solved: The Milton Company has two products Product 1 is

manufactured
The Milton Company has two products Product 1 is manufactured

The Milton Company has two products. Product 1 is manufactured entirely in department X.
Product 2 is manufactured entirely in department Y. To produce these two products, the Milton
Company has two support departments: A (a materials-handling department) and B (a power-
generating department). An analysis of the work done by departments A and B in a typical
period follows:

.:.
The work done in department A is measured by the direct labor-hours of materials-handling
time. The work done in department B is measured by the kilowatt-hours of power. The budgeted
costs of the support departments for the coming year are as follows:

.:.
The budgeted costs of the operating departments for the coming year are $ 1,250,000 for
department X and $ 950,000 for department Y. Supervision costs are salary costs. Depreciation
in department B is the straight-line depreciation of power-generation equipment in its 19th year
of an estimated 25-year useful life; it is old, but well-maintained, equipment.

Required
1. What are the allocations of costs of support departments A and B to operating departments X
and Y using (a) the direct method, (b) the step-down method (allocate department A first), (c)
the step-down method ( allocate department B first), and (d) the reciprocal method?
2. An outside company has offered to supply all the power needed by the Milton Company and
to provide all the services of the present power department. The cost of this service will be $ 80
per kilowatt-hour of power. Should Milton accept? Explain.

The Milton Company has two products Product 1 is manufactured

ANSWER
https://solvedquest.com/the-milton-company-has-two-products-product-1-is-manufactured/

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