University Printers has two service departments (Maintenance and Personnel) and
ID: 2484381 • Letter: U
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.
Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.)
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.
Explanation / Answer
Cost of service department post allocation
Maintenance (x)=12000+(y*304/1900)
=12000+0.16Y
Personnel (Y)=27000+(X*420/3000)
=27000+0.14X
Putting value of Y into X:-
X=12000+0.16*(27000+0.14x)
X=12000+4320+0.0224x
x-0.0224x=16320
x=16320/0.9776
Maintenance(x)=16693.94
Y=27000+0.14*16693.94
Personnel (Y)=29337.15
Particulars
maintenance
Personnel
Printing
Deovelpoing
Total
Machine-hours
420
480
2,100
3000
Labor-hours
304
228
1,368
1900
Department direct costs
12,000
27,000
35,000
23,000
97000
Maintenance
4693.944
-29337.15
3520.458
21122.748
0
Personnel
-16693.94
2337.1516
2671.0304
11685.758
0
Total
0
0
41,191
55,809
97000
Particulars
maintenance
Personnel
Printing
Deovelpoing
Total
Machine-hours
420
480
2,100
3000
Labor-hours
304
228
1,368
1900
Department direct costs
12,000
27,000
35,000
23,000
97000
Maintenance
4693.944
-29337.15
3520.458
21122.748
0
Personnel
-16693.94
2337.1516
2671.0304
11685.758
0
Total
0
0
41,191
55,809
97000
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