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: Maintenance Personnel Printing Developing Machine-hours 600 680 2,720 Labor-hours 380 228 1,292 Department direct costs $ 12,000 $ 23,000 $ 31,000 $ 20,000 Required: Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.) (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Explanation / Answer

Maintenance Personnel Printing Developing Total Manitenece Cost on basis of machine hours 600 680 2720 4000 Allocation of maintenece cost 15 17 68 % 600/4000*100 680/4000*100 2720/4000*100 Personnel Cost on basis of labor hours 380 228 1292 1900 Allocation Of personnelcost 20 12 68 380/1900*100 228/1900*100 1292/1900*100 Cost befor allocation 12000 23000 31000 20000 86000 Allocate maintence Cost -12000 1800 2040 8160 Total 24800 Allocated personnel cost 4960 -24800 2976 16864 Allocate maintence Cost -4960 744 843.2 3372.8 Allocated personnel cost 148.8 -744 89.28 505.92 Allocate maintence Cost -148.8 22.32 25.30 101.18 Allocated personnel cost 4.46 -22.32 2.68 15.18 Allocate maintence Cost -4.46 0.67 0.76 3.04 Allocated personnel cost 0.13 -0.67 0.08 0.46 0 0 36977 49023 86000 In reciprocal method is to keep allocating the two service department until the service department becomes 0

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