Question

Required information

[The following information applies to the questions displayed below.]

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:

				Proportion of Services Used by
Department	Direct Costs			Maintenance		Cafeteria		Machining		Assembly
Machining	$	104,000
Assembly		74,400
Maintenance		46,000		—		0.2		0.5		0.3
Cafeteria		37,000		0.6		—		0.2		0.2

Required:

Compute the allocation of service department costs to producing departments using the direct method. (Do not round intermediate calculations.)

machining

assembly

Answer 1

Maintenance department costs will be divided between Machining and Assembly in the ratio of 5:3 and Cafeteria department costs will be divided between Machining and Assembly in the ratio of 1:1

Allocation of service department costs to producing departments

	Maintenance department	Cafeteria department	Total
Machining	46,000 x 5/8 = $28,750	37,000 x 1/2 = $18,500	$47,250
Assembly	46,000 x 3/8 = $17,250	37,000 x 1/2 = $18,500	$35,750
Total	$46,000	$37,000	$83,000

Please ask if you have any query related to the question. Thank you