Alpha Company has two service departments (Cafeteria Services & Maintenance Serv

Question

Alpha Company has two service departments (Cafeteria Services & Maintenance Services). Alpha has two production departments (Printing Department & Binding Department.) Cafeteria Services has costs of $140,000 and are allocated to production departments based on their number of employees. Employees are:             Cafeteria Services                 2             Maintenance Services           2             Printing Department             4             Binding Department             8 Alpha uses the direct method for service cost allocation. Use this information to determine for Alpha Company the dollar amount of its Cafeteria costs that are to be absorbed by: . (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)             1. the Maintenance Service Department             2. the Printing Department             3. the Binding Department

Explanation / Answer

Service Departments Production Departments Cafeteria Maintenance Printing Binding Services Services Department Department Costs $140,000 Number of employees 2 2 4 8 Direct Method of Service Cost allocation Cafeteria Costs to be allocated directly to production department Base of allocation: Number of employees A Number of employees in production departments 12 (4+8) B Cost of Cafeteria services $140,000 C=B/A Cost per employee $11,666.67 (140000/12) D=4*C Cost allocated to Printing Department $46,666.67 E=8*C Cost allocated to Binding Department $93,333.33 Total $140,000.00

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