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			Printing			Developing
Machine-hours		—			1,800			1,800			4,200
Labor-hours		550			—			550			2,200
Department direct costs	$	2,000		$	12,000		$	13,600		$	10,500

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

Answer 1

Answers

--Direct Method:

	Maintenance	Personnel	Printing	Developing
Service Department Costs	$2,000	$12,000	$13,600	$10,500
Maintenance Allocation (1800+4200 = 6000)	($2,000)		$600	$1,400
Personnel Allocation ( 550 + 2200 = 2750)		($12,000)	$2,400	$9,600
Total Cost allocated	$0	$0	$16,600	$21,500