Arbon Company has three service departments and two operating departments. Selec

Question

Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented below:

Service Departments Operating Departments Equipment Maintenance $47,000 Total Janitorial $76,800 60 Administrative Prep Finishing Costs Number of employees Square metres of space $111,000 80 $283,100 $507,600 $1,025,500 240 1,200 700 2,000 11,000 300 8,000 36,000 1,380 13,100 47,000 500 1,400 occupied Machine-hours The company allocates service department costs by the step-down method in the following order: Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine- hours) Required: Assuming that the company uses the direct method rather than the step-down method to allocate service department costs, how much overhead cost would be assigned to each operating department? (Negative amounts should be indicated by a minus sign.) Service Departments Operating Departments Equipment Maintenance Administrative Janitorial Prep Finishing Total Departmental costs before allocations Allocations: Administrative Janitorial Equipment maintenance Total costs after allocation

Explanation / Answer

Calculations:

Service Departments Operating Departments Total Administrative Janitorial Equipment Maintenance Prep Finishing Departmental costs before allocations 111000 76800 47000 283100 507600 1025500 Allocations: Administrative -111000 77700 33300 0 Janitorial -76800 15360 61440 0 Equipment maintenance -47000 11000 36000 0 Total costs after allocation $ 0 0 0 387160 638340 1025500

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