Question

Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Exercise 24-5 Departmental expense allocations LO P2 Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow Indirect Expense Supervision Utilities Insurance Total Cost Allocation Base 83,200 Number of employees 57,000 Square feet occupied 26,000 Value of assets in use $166,200 Departmental data for the company's recent reporting period follow Department Materials Personnel Manufacturing Packaging Total Employees Square Feet Asset Values 42,500 8,500 102,000 17,000 170,000 6,700 2,680 36,180 21,440 $67,000 45 81 45 180 1. Use this information to allocate each of the three indirect expenses across the four departments 2. Prepare a summary table that reports the indirect expenses assigned to each of the four departments

Answer 1

1
Supervision expenses	Allocation Base	Percent of Allocation Base			Cost to be allocated	Allocated Cost
Department	Number of employees	Numerator	Denominator	% of Total
Materials	45	45	180	25%	83200	20800
Personnel	9	9	180	5%	83200	4160
Manufacturing	81	81	180	45%	83200	37440
Packaging	45	45	180	25%	83200	20800
Totals	180			100%		83200
Utilities	Allocation Base	Percent of Allocation Base			Cost to be allocated	Allocated Cost
Department	Square feet occupied	Numerator	Denominator	% of Total
Materials	42500	42500	170000	25%	57000	14250
Personnel	8500	8500	170000	5%	57000	2850
Manufacturing	102000	102000	170000	60%	57000	34200
Packaging	17000	17000	170000	10%	57000	5700
Totals	170000			100%		57000
Insurance	Allocation Base	Percent of Allocation Base			Cost to be allocated	Allocated Cost
Department	Value of assets in use	Numerator	Denominator	% of Total
Materials	6700	6700	67000	10%	26000	2600
Personnel	2680	2680	67000	4%	26000	1040
Manufacturing	36180	36180	67000	54%	26000	14040
Packaging	21440	21440	67000	32%	26000	8320
Totals	67000			100%		26000
2
	Supervision	Utilities	Insurance	Total
Materials	20800	14250	2600	37650
Personnel	4160	2850	1040	8050
Manufacturing	37440	34200	14040	85680
Packaging	20800	5700	8320	34820
Totals	83200	57000	26000	166200