Question

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	$	105,000
Assembly		77,000
Maintenance		53,000		—		0.2		0.5		0.3
Cafeteria		38,000		0.6		—		0.2		0.2

Required:

Use the step method to allocate the service costs, using the following:

a. The order of allocation starts with Maintenance. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

	Maintenence	Cafeteria	Machining	Assembly
Service Department Costs
Maintenance
Cafeteria
Total Cost

b. The allocations are made in the reverse order (starting with Cafeteria). (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

	Maintenence	Cafeteria	Machining	Assembly
Service Department Costs
Maintenance
Cafeteria
Total Cost

Answer 1

Required:

Use the step method to allocate the service costs, using the following:

a. The order of allocation starts with Maintenance. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

	Maintenence	Cafeteria	Machining	Assembly
Service Department Costs	53000	38000
Maintenance	-53000	10600	26500	15900
Cafeteria		-48600	24300	24300
Total Cost			50800	40200

b. The allocations are made in the reverse order (starting with Cafeteria). (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

	Cafeteria	Maintenance	Machining	Assembly
Service Department Costs	38000	53000
Cafeteria	-38000	22800	7600	7600
Maintenance		-75800	47375	28425
Total Cost			54975	36025