COLEGIO DE DAGUPAN

Arellano Street, Dagupan City

School of Business and Accountancy

COST ACCOUNTING
First Semester, AY 2017-2018
Quiz No. 7

Boring Company manufactures and sells aerodynamic bicycles. It has two main divisions: Corporate
Support and Production. The Corporate Support Group has three departments: Human Resource,
Finance and Marketing while the Production Group has two departments: Assembly and Finishing. The
following table shows the cost per department and the percentage of service output consumed by the
departments.

Total Cost To
Service Department Variable Cost Fixed Cost Be Allocated
Human Resource 80,000 120,000 200,000
Finance 65,000 97,500 162,500
Marketing 135,000 108,000 243,000
Total 280,000 325,500 605,500

User of Service Human Resource Finance Marketing

Assembly 40% 45% 60%
Finishing 25% 50% 40%
Human Resource 5%
Finance 10%
Marketing 25%

Required: Compute the cost to be allocated to the Assembly and Finishing departments using the
a. Direct method
b. Step-down method (Assume that the cost in Human Resources is allocated first to the other four
departments and Finance is allocated next.)

cost acctg/q7/scs Page 1