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 ExpenseCost Supervision Utilities Insurance Allocation Base $ 82,800 Number of employees 53,000 24,000 Square feet occupied Value of assets in use 159,800 Total Departmental data for the company's recent reporting period follow Department Employees Square Feet Asset Values Materials Personnel Manufacturing Packaging 28 7 63 6,500 65,000 19,500 39,000 12,600 3,150 31,500 15,750 Total 140 130,000 63,000 1. Use this information to allocate each of the three indirect expenses across the four departments

Explanation / Answer

Supervision Expense Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Numerator Denominator % of Total Department Number of Employees No. Of Emp Total employees % of Total Material 28 28 140 20% 82800 16560 Personnel 7 7 140 5% 82800 4140 manufacturing 63 63 140 45% 82800 37260 packaging 42 42 140 30% 82800 24840 TOTALS 140 100% 82800 Utilities Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Numerator Denominator % of Total Department Area Area Total Area % of Total Material 39000 39000 130000 30% 53000 15900 Personnel 6500 6500 130000 5% 53000 2650 manufacturing 65000 65000 130000 50% 53000 26500 packaging 19500 19500 130000 15% 53000 7950 TOTALS 130000 100% 53000 Insurance Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Numerator Denominator % of Total Department Asset value Asset value Total Asset value % of Total Material 12600 12600 63000 20% 24000 4800 Personnel 3150 3150 63000 5% 24000 1200 manufacturing 31500 31500 63000 50% 24000 12000 packaging 15750 15750 63000 25% 24000 6000 TOTALS 63000 100% 24000 SUMMARY TABLE Supervision Utilities Insurance Total Material 16560 15900 4800 37260 Personnel 4140 2650 1200 7990 manufacturing 37260 26500 12000 75760 packaging 24840 7950 6000 38790 Totals 82800 53000 24000 159800

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