Woh Che Co. has four departments: materials, personnel, manufacturing, and packa

Question

Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Indirect Expense Cost Allocation Base Supervision $ 82,800 Number of employees Utilities 53,000 Square feet occupied Insurance 24,000 Value of assets in use Total $ 159,800

Departmental data for the company’s recent reporting period follow.

Department Employees Square Feet Asset Values Materials 28 39,000 $ 12,600 Personnel 7 6,500 3,150 Manufacturing 63 65,000 31,500 Packaging 42 19,500 15,750 Total 140 130,000 $ 63,000

2.

Prepare a summary table that reports the indirect expenses assigned to each of the four departments.

Explanation / Answer

#Supervision expenses are allocated on the basis of number of employees (i.e. in the ratio 28:7:63:42)

#Utilities are allocated on the basis of square feet occupied (i.e. in the ratio 39000:6500:65000:19500)

#Insurance expense is allocated on the basis of value of assets used (i.e. in the ratio 12600:3150:31500:15750)

Department   Spervision Utilities Insurance Total Material 16560 15900 4800 37260 Personnel 4140 2650 1200 7990 Manufacturing 37260 26500 12000 75760 Packaging 24840 7950 6000 38790 Total 82800 53000 24000

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