Question

Woh Che Co. has four departments: Materials, Personnel, Manufacturing, and Packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow. Indirect Expense Supervision Utilities Insurance Total Cost Allocation Base $ 84,400 Number of employees 69,000 square feet occupied 32,000 Value of assets in use $185,400 Departmental data for the company's recent reporting period follow. Employees 38 Department Materials Personnel Manufacturing Packaging Total Square Feet 64,750 9,250 92,500 18,500 185,000 Asset Values $ 7,900 4,740 45,820 20,540 $79,000 1. Use this information to allocate each of the three indirect expenses across the four departments. 2. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.

Answer 1

Solution

Supervision Expenses	Allocation base	Percent of allocation base			Cost to be allocated	Allocated cost
Department		Numerator	Denominator	% of total
Material	Number of employees	38	190	20%	$       84,400.00	$   16,880.00
Personnel	Number of employees	19	190	10%	$       84,400.00	$     8,440.00
Manufacturing	Number of employees	76	190	40%	$       84,400.00	$   33,760.00
Packaging	Number of employees	57	190	30%	$       84,400.00	$   25,320.00
Totals		190		100%		$   84,400.00
Utilities	Allocation base	Percent of allocation base			Cost to be allocated	Allocated cost
Department		Numerator	Denominator	% of total
Material	Square feet occupied	64750	185000	35%	$       69,000.00	$   24,150.00
Personnel	Square feet occupied	9250	185000	5%	$       69,000.00	$     3,450.00
Manufacturing	Square feet occupied	92500	185000	50%	$       69,000.00	$   34,500.00
Packaging	Square feet occupied	18500	185000	10%	$       69,000.00	$     6,900.00
Totals		185000		100%		$   69,000.00
Insurance	Allocation base	Percent of allocation base			Cost to be allocated	Allocated cost
Department		Numerator	Denominator	% of total
Material	Value of asset in use	$        7,900.00	79000	10%	$       32,000.00	$     3,200.00
Personnel	Value of asset in use	$        4,740.00	79000	6%	$       32,000.00	$     1,920.00
Manufacturing	Value of asset in use	$      45,820.00	79000	58%	$       32,000.00	$   18,560.00
Packaging	Value of asset in use	$      20,540.00	79000	26%	$       32,000.00	$     8,320.00
Totals		$      79,000.00		100%		$   32,000.00

.

	Supervision	Utilities	Insurance	Total
Material	$ 16,880	$ 24,150	$ 3,200	$ 44,230
Personnel	$ 8,440	$ 3,450	$ 1,920	$ 13,810
Manufacturing	$ 33,760	$ 34,500	$ 18,560	$ 86,820
Packaging	$ 25,320	$ 6,900	$ 8,320	$ 40,540
Totals	$ 84,400	$ 69,000	$ 32,000	$ 185,400