Mouse Company has two production departments and two service departments. The pr

Question

Mouse Company has two production departments and two service departments. The production departments are Mixing and Finishing. The service departments are IT and Personnel. Costs incurred in the production departments during 2018 before allocation of service department costs are as follows: Mixing department, $400,000; and Finishing,$275,000. Costs incurred in the service departments during the year are as follo $125,000; and Personnel, $75,000. If Mouse Company allocates service department costs using the sequential (step) method. IT costs are allocated first. The allocation base by the Personnel department is the number of employees 2. Department Service Calls Number of Employees 10 IT Personnel Mixing Finishing 3,000 2,000 23,000 xX,000 8,000 20 Calculate the total costs of each production department after the service department costs have been fully allocated. Use the Direct Method. Calculate the total costs of each production department after the service department costs have been fully allocated. Use the Step (sequential) Method. a. b. PROD/bwskfshd.P CrseSchdDet 1/2

Explanation / Answer

Solution a:

Solution b:

From Service Department Cost Allocation - Direct Method Service Department Production Departments IT Personnel Mixing Finishing Direct charges of department $125,000 $75,000 $400,000 $275,000 IT (23:8) -$125,000 $92,742 $32,258 Personnel (20:5) -$75,000 $60,000 $15,000 Total $0 $0 $552,742 $322,258

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