Question

Kizzle’s Crepes Co. produces world famous crepes. The company’s crepes are produced via its Mixing and Cooking activities, which both rely on the Janitorial and Maintenance activities. Kizzle’s management knows the most practical driver of Janitorial costs is square feet, but is uncertain whether to allocate Maintenance costs based on asset value of production equipment, number of service calls, or machine hours. Kizzle’s management estimates that the Cooking and Mixing activities each require about twice as much space as the Maintenance activity.

1. What factors should Kizzle’s management consider in choosing the driver to use for the allocation of Maintenance costs? Of the three potential drivers mentioned in the problem, which one(s) should Kizzle’s most likely not use?

2. Assume the Kizzle's management allocated Maintenance costs based on the number of service calls. Further assume that in a given period, the Janitorial, Mixing and Cooking activities incur 16, 40, and 24 service calls, respectively, and that the Janitorial and Maintenance costs of that period are $3000 and $4200, respectively. Determine the total costs allocated from each support activity to the other three activities using the reciprocal services method.

I am stuck on problem #2 and cannot figure out the solution.