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University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing)....

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.

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Answer #1

Solution :

From Service Department Cost Allocation - Direct Method
Service Department Production Departments
Maintenance Personnel Printing Developing
Direct charges of department $2,000 $12,000 $13,600 $10,500
Maintenance (18:42) -$2,000 $0 $600 $1,400
Personnel (550:2200) $0 -$12,000 $2,400 $9,600
Total $0 $0 $16,600 $21,500
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