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:

Required:

Use the direct method to allocate these service department costs to the operating departments. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

Maintenance Personnel Printing Developing Machine-hours — 1,400 1,400 4,200 Labor-hours 900 — 900 3,100 Department direct costs $ 2,800 $ 12,800 $ 14,500 $ 11,700

Explanation / Answer

Maintenance Personnel Printing Developing Service department costs 2800 12800 Maintenance allocation -2800 700 2100 Personnel allocation -12800 2880 9920 Total costs allocated 0 0 3580 12020 Workings: Maintenance allocation Printing =2800/(1400+4200)*1400 Developing =2800/(1400+4200)*4200 Personnel allocation Printing =12800/(900+3100)*900 Developing =12800/(900+3100)*3100

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