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hours. Last period the following costs Were recorde Cutting Department overhead Pasting Department overhead Computing Department total costs Maintenance Department total costs $400,000 $600,000 $700,000 $300,000 Production Department data: Cutting Pasting 7,500 8,000 Computing Maintenance Hours of operation Direct labor hours recorded 5,000 4,000 15,000 4,000 2,500 8,000 Required a. Determine the amount of Maintenance costs allocated to the Cutting and Pasting Departments using step method of allocating service department costs step method of allocating service department costs. Determine the total overhead costs of the Cutting and Pasting Departments when this method of allo b. Determine the amount of Computing costs allocated to the Cutting and Pasting Departments using c. ing service department costs is used. (24 points)

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Answer #1

Solution:

From Service Department Cost Allocation - Step Method (Allocation of Maintenance First)
Service Department Production Departments
Computing Maintenance Cutting Pasting
Direct charges of department $400,000.00 $600,000.00 $700,000.00 $300,000.00
Maintenance (4:4:8) $150,000.00 -$600,000.00 $150,000.00 $300,000.00
Computing (5000:7500) -$550,000.00 $220,000.00 $330,000.00
Total $0.00 $0.00 $1,070,000.00 $930,000.00

a) Maintenance cost allocated to cutting = $150,000

Maintenance cost allocated to pasting = $330,000

b) Computing cost allocated to cutting = $220,000

Computing cost allocated to pasting = $330,000

c) Total overhead cost of cutting = $1,070,000

Total overhead cost of pasting = $930,000

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