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 orn 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 tor the current period: loping 1,500 900 $13,600 4,500 3,100 S11,200 1,500 Machine-hours Labor-hours Department direct costs 900 2,200 $12.200 $13,600 $11.200 $12,200 Required Allocate the service department costs using the step method, starting with the Maintenance Department. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) Maintenance Personnel Printing Developing Service department costs Maintenance Personnel Total costs allocated

Explanation / Answer

Solution:

Working notes:

Maintenance:

Personnel/Printing = (1500*2200)/(1500+1500+4500) = $440

Developing = (4500*2200)/(1500+1500+4500)

= $1320

Personnel:

$12,640 cost of personnel is $12,200(Direct cost) + $440(allocated from maintenance)

Printing = (900*12640)/(900+3100) = $2,844

Developing = (3100*12640)/(900+3100) = $9,796

Particulars Maintenance Personnel Printing Developing Service Department costs 2,200 12,200 0 0 Maintenance (2,200) 440 440 1,320 Personnel 0 (12,640) 2,844 9,796 Total cost allocated 0 0 3,284 11,116

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