Question

Support Department Cost Allocation-Direct Method Christmas Timber, Inc., produces Christmas trees. The trees are produced through a cutting and pruning process. Machine maintenance and janitorial labors are performed throughout the production process by nonproduction employees. Maintenance and janitorial costs are allocated based on machine hours used and the number of trees in each department, respectively. The company estimates that the cutting and pruning areas typically have about 6 and 54 trees, respectively, in them at 1 time. The company also estimates that the cutting process requires about 9 times as many machine hours as the pruning process. The total costs of each department are as follows: Maintenance Department $8,000 Janitorial Department 6,000 Cutting Department 55,000 Pruning Department 13,000 Using the direct method of support department cost allocation, determine the total cost of each production department after allocating all support costs to the production departments. Cutting Pruning Department Department Production departments' total costs

Answer 1

1. By using direct method, we will distribute the costs incurred by supporting activities to the main activities in the ratio as the capacity of such main activities, how they use supporting activities.
2. Find the attached image wherein workings are done clearing showing the base for allocation of expenses and also done the computation of total production department costs.

1 Bosis and ratio of allocation Cost maintenance Basis machine hows Ratio fed 9:0 b Janitorial no. of trees 6:54 > Allocation particulars Cutting dept. Pruning dept 7200 800 U SM ALMA Sa maintenance 8000 59:1 b Goo 5400 Janitorial 6000 - 6:54 5500 C D Cutting Pouring S 13000 - Production dept. total costs 62,800 62,800 19,200 19,200