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 20 and 60 trees, respectively, in them at one 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	$7,800
Janitorial Department	5,000
Cutting Department	54,500
Pruning Department	11,000

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 Department		Pruning Department
Production departmentsʼ total costs	$		$

Answer 1

Solution: Cost Allocation of Maint. Dept cost Allocation of Cutting. Dept cost Production departments? total costs Maintenance Janitorial Cutting Pruning Department Department Department Department 7800 5000 54500 11000 -7800 7020 780 -5000 1250 3750 62770 15530 Wokring Cutting Pruning Department Department 7800*9/19+1) 7800*1/(9+1) 5000*20/(20+60) 5000*60/(20+60) | Allocation of Maint. Dept cost Allocation of Cutting. Dept cost