Question

Jamison Company uses the reciprocal services method to allocate support department costs and has gathered the following information: ​ Janitorial Department Usage Cafeteria 50% Cutting 10% Assembly 40% Cafeteria Department Usage Janitorial 20% Cutting 60% Assembly 20% Janitorial Department costs are $450,000. Cafeteria Department costs are $250,000. What are the correct equations to represent (a) the total Janitorial (J) costs, (b) the total Cafeteria (C) costs, and (c) the rewritten equation substituting C into J?

Answer 1

Answer:

a)J = 450,000 +(20% * C)

b)C =250000+ (50%*J )

c)J = 450000 + {20%* [250000+(50%*J)}

Explanation:

a)J = 450,000 +(20% * C)

This represent the total cost of Janitorial Department due to the fact that 450000 is a direct cost of janitorial department plus 20% of total cost of Cafeteria department allocated to Janitorial department.

b)C =250,000+ (50%*J )

This represent the total cost of cafeteria Department due to the fact that 250,000 is a direct cost of cafeteria department plus 50% of total cost of Janitorial department allocated to cafeteria department.

c)

Substituting the value of C determined in part b in part a

J = 450,000 + {20%* [250,000+(50%*J)}

Therefore in place of C in equation 1 ,the value of c determined in equation 2 is thereby substituted .