1. The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs...
1.
The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $792,000 are allocated on the basis of machine hours. The Accounting Department's costs of $171,600 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $250,000 and $450,000, respectively.
| Maint | Acctg | A | B | |
| Machine hours | 590 | 100 | 3,600 | 360 |
| Number of employees | 2 | 2 | 8 | 4 |
What is the Maintenance Department's cost allocated to Department A
using the direct method?
2 and 3:
The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $489,600 are allocated on the basis of machine hours. The Accounting Department's costs of $122,400 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $210,000 and $410,000, respectively.
| Maint | Acctg | A | B | |
| Machine hours | 895 | 80 | 2,400 | 320 |
| Number of employees | 2 | 2 | 8 | 4 |
2. What is the Accounting Department's cost allocated to Department
B using the direct method?
3. What is the Maintenance Department's cost allocated to Department B using the step method and assuming the Maintenance Department's costs are allocated first?
Homework Answers
ANSWER NO 1
Maintenance Department Cost = $792000
cost allocated on the basis of machine hour
Department 'A' Allocation
=792000/(3600+360)*3600 = $720000
ANSWER NO 2
ACCOUNTING DEPARTMENT COST =$122400
Cost allocated on the basis of Number of employees
=122400/(8+4)*4 = $40800
ANSWER 3 step method
Maintenance department cost=$489600
it will allocated between accounting,A & B department
=489600/(80+2400+320)*320 = $55954
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