Problem A (10 points) Capital Industries has two factory service departments and

Question

Problem A (10 points) Capital Industries has two factory service departments and two production (operating) departments. Selected data concerning the four departments Operating Departments Service Departments Parts Repair & Total 2,030 12,980 Management Maintenance Packa # of purchase orders 30 1,265 650 # of machine hours 10,300 2,200 If Capital uses the step method, how would service department costs be allocated to operating (production) departments? (Assume the order of allocation is parts management, then repair & maintenance). In your calculations, include the final total for MOH in the two operating departments. Service Departments Parts Operating Departments Repair & Management Maintenance AssemblyPacka Total Total MOH $100,000 $250,000 $1,100,000 285,000 $1,735,000

Explanation / Answer

Service Department Cost Allocation Statement Under Step Down Method (Starting with Parts Management then Repair & Maintenance) Service Operating Total Parts Management Repair & Maintenance Assembly Packaging Total MOH $                100,000 $                  250,000 $       1,100,000 $            285,000 $         1,735,000 Allocation of Parts Management $              (100,000) $                      4,250 $             63,250 $              32,500 $                        -   Allocation of Communications $               (254,250) $           209,502 $              44,748                             -   Total Allocated Costs $                            -   $                             -   $       1,372,752 $            362,248 $         1,735,000 Allocation of Parts Management: # of Purchase Orders Weighted Base Allocated Cost Repair & Maintenance                               85 4.25% $               4,250 Assembly                         1,265 63.25% $             63,250 Packaging                             650 32.50% $             32,500 Total                         2,000 100.00% $           100,000 Allocation of Repair & Maintenance: # of Mchine Hours Weighted Base Allocated Cost Assembly                       10,300 82.40% $           209,502 Packaging                         2,200 17.60% $             44,748 Total                       12,500 100.00% $           254,250

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