University Printers has two service departments (Maintenance and Personnel) and

Question

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:

Allocate the service department costs using the step method, starting with the Maintenance Department.

Maintenance Personnel Printing Developing Machine-hours ---------------- 1,100 1,100 3,300 Labor-hours 600 ------------- 600 2,400 Department direct costs $5,600 $15,600 $17,200 $13,700

Explanation / Answer

Allocate the service department costs using the step method, starting with the Maintenance Department.

Maintenance Personnel Printing Developing Service department costs 5600 15600 17200 13700 Maintenance -5600 1120 1120 3360 Personnel -16720 3344 13376 Total cost allocated 0 0 21664 30436

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