Distribution of service department costs to production departments using the sequential...

Distribution of service department costs to production departments using the sequential distribution method

similar to Self-Study Problem 1

Required:

Using the information in P4-6 above, prepare a schedule showing the distribution of the service departments’ expenses using the sequential distribution method in the order of number of other departments served. (Hint: First distribute the service department that services the greater number of other departments.)

Reference: P4- 6

Distribution of service department costs to production departments using the direct method

similar to Self-Study Problem 1

Yumee Products Inc. is divided into five departments, Mixing, Blending, Finishing, Factory Office, and Building Maintenance. The first three departments are engaged in production work. Factory Office and Building Maintenance are service departments. During the month of June, the following factory overhead was incurred for the departments:

Mixing . . . . . . . . . . . . . . . . . . . $21,000

Blending . . . . . . . . . . . . . . . . . 18,000

Finishing. . . . . . . . . . . . . . . . . 25,000

Factory Office. . . . . . . . . . . . . 9,000

Building Maintenance . . . . 6,400

The bases for distributing service department expenses to the other departments follow:

Building Maintenance–On the basis of floor space occupied by the other departments as follows: Mixing, 10,000 sq ft; Blending, 4,500 sq ft; Finishing, 10,500 sq ft; and Factory Office, 7,000 sq ft.

Factory Office–On the basis of number of employees as follows: Mixing, 30; Blending, 20; and Finishing, 50.

Required:

Prepare a schedule showing the distribution of the service departments’ expenses using the direct distribution method.

Reference: Self-Study Problem 1

Distributing Service Department Expenses

and 4-7 are similar to this problem.) Happy Valley Manufacturing Inc. Happy Valley Manufacturing Inc. is divided into five departments, which consist of three producing departments (Machining, Assembly, and Finishing) and two service departments (Building Maintenance and Storeroom). During September, the following factory overhead was incurred for the various departments:

Machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,000

Assembly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,000

Finishing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000

Building Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000

Storeroom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000

The bases for distributing service department expenses to the other departments were as follows:

Bldg. Maintenance–on the basis of square feet of floor space occupied:

Machining, 5,000 sq ft; Assembly, 10,000 sq ft; Finishing, 3,000 sq ft; Storeroom, 2,000 sq ft.

Storeroom–on the basis of the number of material requisitions processed: Machining, 400; Assembly, 250; Finishing, 100.

Required:

Rounding off allocated amounts to the nearest whole cent, prepare schedules showing the distribution of the service departments’ expenses using:

1. The direct distribution method.

2. The sequential distribution method.

Suggestions:

1. When using the direct distribution method, you must realize that one service department’s use of another service department is ignored in performing the distribution.

2. When using the sequential distribution method, you must first determine the order in which service departments will be distributed.