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 Printing Developing 4,200 2,200 $10,500 Personnel Machine-hours 1,800 1,800 550 Labor-hours 550 Department direct costs $2,000 $12,000 $13,600 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 2,000 12,000 (2,000) (12,000) Personnel allocation $ 0 Total costs allocated O

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Answer 1

Developing Service deparment costs Maintenance allocation Personnel allocation Total costs allocated Maintenance Personnel Printing 2,000 12,000 (2,000) (12,000) 600 2,400 3,000 1,400 9,600 11,000 Working Notes Allocation of maintenance cost Machine hours Printing Developing Total Machine hours 1,800 4,200 6,000 $ 2,000 Maintenance cost Allocation Printing (2,000 x 1,800/6,000) Developing (2,000 x 4,200/6,000) 600 $ $ 1,400 Allocation of Personnel cost Labor hours Printing Developing Total Labor hours 550 2,200 2,750 12,000 Personnel cost Allocation Printing (12,000 x 550/2,750) Developing (12,000 x 2,200/2,750) $ 2,400 9,600