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: Maintenance Personnel 1,000 Machine-hours Labor-hours Department direct costs 500 $5,000 Printing 1,000 500 $15,000 Developing 3,000 2,000 $10,000 $12,000 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.) Printing Developing Maintenance $ 5,000 (5,000) Personnel $ 12,000 Service department costs Maintenance allocation Personnel allocation Total costs allocated 0 $ 12,000 $ 0 $ 0

Answer 1

Maintenance department costs to be allocated to printing department= Maintenance department costs x Printing department machine hours / Total machine hours

= 5,000 x 1,000/4,000

= $1,250

Maintenance department costs to be allocated to developing department = Maintenance department costs x Developing department machine hours/Total machine hours

= 5,000 x 3,000/4,000

= $3,750

Personnel department costs to be allocated to printing department= Personnel department costs x Printing department labor hours / Total labor hours

= 12,000 x 500/2,500

= $2,400

Personnel department costs to be allocated to developing department = Personnel department costs x Developing department labor hour/Total labor hours

= 12,000 x 2,000/2,500

= $9,600

	Maintenance	Personnel	Printing	Developing
Service department costs	5,000	12,000
Maintenance allocation	-5,000		1,250	3,750
Personnel allocation		-12,000	2,400	9,600
Total costs allocated	0	0	3,650	13,350

Kindly comment if you need further assistance.

Thanks‼!            

Answer 2

print 1,000+ develop 3,000= 4000