Question

Exercise 11-29 (Static) Cost Allocation: Direct Method (LO 11-2) 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 1, e8e1 ,eee Machine-hours Labor-hours Department direct costs 50 588 $ 5,880 Developing 3,000 2.000 $10,689 $12,eee $15,000 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 Service department costs Maintenance allocation Personnel allocation Total costs allocated 030503

Answer 1

computation of costs allocated using dorect method maintenance personnel printing Developing $ 12000 service department $ 5000 costs maintenance $85000) allocation I personnel allocation/ $1250 $(2000) $2400 $3750 $ 9600 Total costs allocated $0 $ $ 3650 $13350 for the purpose of cost allocation porst we have to calculate overhead! rate for maintenance departusent: overhead vate = Total cost Total number of machine bours operat E $5000 1000+3000 = $5000 4ooo $1025

for personnel de partusent overhead rate = local Total cost Total number of machine hours Coperating department $ 12000 2500 hours = 44.8 Note :- we have to usultiply overhead rate with respective department hours