Boomtown is preparing a cost analysis of three departments: Parks, Fire, and Water. To comply with...
Boomtown is preparing a cost analysis of three departments: Parks, Fire, and Water. To comply with accuracy standards in allocating indirect costs, Boomtown will employ the step-down method of cost allocation. There are two indirect cost groups that are allocated: City Administration and Facilities. Costs for facilities are allocated first, and then cost for city administration are allocated. Using the data in Table 5.5 Prepare the cost allocation using direct cost as the base and determine the full cost of the departments.
| Indirect Cost Groups | Direct Cost | Base | Allocation | Subtotal | Base | Allocation | Subtotal |
| Facilities | $ 5,212,544 | ||||||
| City Admin | $ 1,475,241 | ||||||
| Departments | |||||||
| Parks | $ 15,025,842 | 15.74% | |||||
| Fire | $ 45,218,534 | 47.35% | |||||
| Water | $ 35,248,612 | 36.91% | |||||
| 100.00% |
Homework Answers
1.Statement Showing Allocation of Indirect cost group to Department and total cost. Amount in $
| Particular |
Dept Parks |
Dept Fire |
Dept Water |
Indirect Tax Group Facilities |
Indirect Tax Group City Admin |
Ratio | Basis | Total |
| Direct Cost Before Allocation | 15025842 | 45218534 | 35248612 | 5212544 | 1475241 | 102180773 | ||
| Allocation | ||||||||
| Facility | 781882 | 2345645 | 1824390 | (5212544) | 260627 | wn-1 | Direct cost | 5212544 |
| City Admin | 273226 | 821933 | 640709 | (1735868) | wn-2 | Direct cost | 1735868 | |
| Total Cost | 16080950 | 48386112 | 37713711 | |||||
WN-1 allocation of cost of Facility
Total Direct Material Cost except Facility =5212544+15025842+45218534+35248612
=100705532
Ratio=5.00:15.00:45.00:35.00
WN-2 allocation of cost of City Admin
Total Direct Material Cost except City Admin =15025842+45218534+35248612
=95492988
ratio=15.74:47.35:36.91
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