Case 22.7 Universe, Inc. has two service departments, Maintenance and Personnel,

Question

Case 22.7 Universe, Inc. has two service departments, Maintenance and Personnel, as well as two production departments, Venus and Mars. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has beern gathered for the current year: Venus $7,500 800 12 aintenance Personnel Mars $12,500 600 16 Direct department costs Square footage Number of employees $%9,000 400 $6,000 200 1) Refer to Case 22.7. The total cost allocated from Maintenance to Mars would be what amount? 2) Refer to Case 22.7. The total cost allocated from Personnel to Venus would be what amount? 3) Refer to Case 22.7. What would be the total cost of the Venus Department after allocation? 4) Refer to Case 22.7. What would be the total cost of the Mars Department after allocation? 5) Refer to Case 22.7. What are the total indirect expenses absorbed by Venus Department and Mars Department after allocation, respectively?

Explanation / Answer

1) Cost allocation rate for Maintenance = total maintenance costs / total square footage of production depts.

= 9000/(800+600)

= $6.43

  

Total cost allocated to Mars from Maintenance department = 6.43* 600

   = $3,858

2) Allocation rate for Personnel dept. = Personnel dept. costs / total number of employees of production dept

= 6000 / 28

= $214.29

Total cost allocated to Venus from Personnel department = 214.29*12

= $2,571.43

3) Total cost of Venus department after allocation

4)  Total cost of Mars department after allocation

5) Indirect expenses absorbed by production departments are:

Venus Direct department cost $7,500 Maintenance cost allocation $5,144.00 Personnel cost allocation $2,571.48 Total cost $15,215.48

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.