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 on 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 for the current period: Maintenance Personnel Printing Developing Machine-hours — 1,800 1,800 4,200 Labor-hours 550 — 550 2,200 Department direct costs $ 2,000 $ 12,000 $ 13,600 $ 10,500 Required: Use the direct method to allocate these service department costs to the operating departments.

Explanation / Answer

Maintenance Personnel Printing Developing Maintenance -2000 600 1400 Personnel -12000 2400 9600 Total costs allocated 3000 11000 Working: Printing: Maintenance =2000/(1800+4200)*1800 Personnel =12000/(550+2200)*550 Developing: Maintenance =2000/(1800+4200)*4200 Personnel =12000/(550+2200)*2200

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