Question

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:

				Proportion of Services Used by
Department	Direct Costs			Maintenance		Cafeteria		Machining		Assembly
Machining	$	96,000
Assembly		70,400
Maintenance		43,600		—		0.2		0.5		0.3
Cafeteria		35,000		0.6		—		0.2		0.2

Assume that both Machining and Assembly work on just two jobs during the month of August: CM-22 and CM-23. Costs are allocated to jobs based on machine-hours in Machining and labor-hours in Assembly. The number of labor- and machine-hours worked in each department are as follows:

		Machining		Assembly
Job CM-22:	Machine-hours	320		60
	Labor-hours	50		20
Job CM-23:	Machine-hours	40		50
	Labor-hours	30		220

How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23? (Round "Department rate" to 2 decimal places and final answers to the nearest whole dollar.)

	Job CM-22 Job CM-23 Machining Assembly

Answer 1

Direct Method of service cost allocation to production
	To
	Machining	Assembly
Maintenance (a)	27,250	16,350
Cafeteria (b)	17,500	17,500
	44,750	33,850
(a)	43600 *	.5+.3
		0.5
(b)	35000 *	.2+.2
		0.2
Note - use of Maintenance's cost by Cafeteria and the use of Cafeteria costs by Maintenance are ignored
Service department cost allocation to JOB CM-22 AND CM-23
			Machining	Assembly
Service department cost allocated			44750	33850
Machine Hours
CM-22		320	39,778
CM-23		40	4,972
			44,750
Labour Hours
CM-22		20		2,821
CM-23		220		31,029
				33,850
		Job CM-22	Job CM-23
Machining		39,778	4,972
Assembly		2,821	31,029
		42,599	36,001