 Business
17 August, 17:55

# 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?

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1. 17 August, 18:15
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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.