Question

In: Accounting

CJ’s Motorcycle Store has two service departments: Maintenance and Personnel. The maintenance department’s costs are allocated...

CJ’s Motorcycle Store has two service departments: Maintenance and Personnel. The maintenance department’s costs are allocated on the basis of maintenance hours. The personnel department’s costs are allocated based on the number of employees. CJ has two production departments: Assembly and Repairs. The following data is provided to you for review: Support Departments Production Departments Maintenance Personnel Assembly Repairs Budgeted costs

Support Departments Support Departments Production Departments Production Departments
Maintenance Personnel Assembly Repairs
Budgeted cost $320,000 $80,000 $160,000 $240,000
Budgeted maintenance hours 800 960 640
Number of employees 40 160 480

Required:

a) Using the direct method, calculate how much of the maintenance and personnel costs will be allocated to Assembly and Repairs, respectively.

b) Using the step-down method, presuming that Maintenance is allocated first, calculate how much of the maintenance and personnel costs will be allocated to Assembly and Repairs, respectively.

Solutions

Expert Solution

a) Using Direct Method--

In direct method, service departments cost are allocated only to production departments.

Calculation of maintenance department cost allocated to assembly department-

= (Budgeted cost of maintenance department / Total budgeted maintenance hours for production departments ) * Budgeted hours for assembly department.

= (320000 / 960+640) * 960

= 200 * 960

= 192000//

Therefore the maintenance department cost allocated to assembly department is $192000.

Calculation of maintenance cost allocated to repairs department-

=  (Budgeted cost of maintenance department / Total budgeted maintenance hours for production departments ) * Budgeted hours for repairs department.

= (320000 / 1600) * 640

= 200 * 640

= 128000//

Therefore the maintenance department cost allocated to repairs department is $128000.

Calculation of personnel department cost allocated to assembly department-

=  (Budgeted cost of personnel department / Total budgeted employees for production departments ) * Budgeted employees for assembly department.

= (80000 / 160 + 480) * 160

= 125 * 160

= 20000//

Therefore the personnel department cost allocated to assembly department is $ 20000.

Calculation of personnel department cost allocated to repairs department-

=  (Budgeted cost of personnel department / Total budgeted employees for production departments ) * Budgeted employees for repairs department.

= (80000 / 160 + 480) * 480

= 125 * 480

=60000.

Therefore the personal department cost allocated to repairs department is $ 60000.

b) Using step down method-

Here we recognises the services provided by one service department to the other, but after a particular service department cost is allocated, it will not recieve cost from the other service department. In the question it is said that maintenance department cost is allocated first, so the maintenance department will not recieve cost from the personnel department.

Calculation of maintenance department cost allocated to personnel department-

=  (Budgeted cost of maintenance department / Total budgeted maintenance hours for all departments ) * Budgeted hours for personnel department.

= ( 320000 / 800+960+640) * 800

= 133.3 * 800

= 106640//

Therefore the maintenance cost allocated to personnel department is $ 106640.

Calculation of maintenace department cost allocated to assembly department-

=  (Budgeted cost of maintenance department / Total budgeted maintenance hours for all departments ) * Budgeted hours for assembly department.

= ( 320000 / 800+960+640) * 960

= 133.3 * 960

= 127968//

Therefore the cost of maintenance department cost allocated to assembly department is $ 127968.

Calculation of maintenance department cost allocated to repairs department-

=  (Budgeted cost of maintenance department / Total budgeted maintenance hours for all departments ) * Budgeted hours for repairs department.

= ( 320000 / 800+960+640) * 640

= 133.3 * 640

= 85312//

Therefore the cost of maintenance department cost allocated to repairs department is $ 85312.

Calculation of personnel department cost allocated to assembly department-

Here the personnel department recieved $ 106640 from maintenance department as allocated costs. Therefore the total cost that should be allocated to production departments from personnel department is-

=80000 + 106640

= 186640.

=  (Total cost of personnel department / Total employees for production departments ) * Budgeted employees for assembly department.

= (186640 / 160+480) * 160

= 291.6 * 160

= 46656//

Therefore the cost of personnel department allocated to assembly department is $112992.

Calculation of personnel department cost allocated to repairs department-

=  (Total cost of personnel department / Total budgeted employees for production departments ) * Budgeted employees for repairs department.

= ( 186640 / 160 + 480 ) * 480

= 291.6 * 480

= 139968//

Therefore the total cost of personnel department allocated to repairs department is $139968.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated...
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $100,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Support Departments Production Departments Maintenance Department Personnel Department A B Budgeted costs $300,000 $100,000 $160,000 $240,000 Budgeted maintenance-hours NA 800 1,200...
Bolton Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated...
Bolton Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $100,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Support Departments Production Departments Maintenance Department Personnel Department A B Budgeted costs $300,000 $100,000 $160,000 $240,000 Budgeted maintenance-hours NA 800 1,200...
Mushed’s String Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are...
Mushed’s String Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Support Departments Production Departments Maintenance Personnel A B Budgeted costs $320,000 $80,000 $160,000 $240,000 Budgeted maintenance-hours NA 200 240 160...
Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are...
Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Support Departments Production Departments Maintenance Department Personnel Department A B Budgeted costs $160,000 $40,000 $80,000 $120,000 Budgeted maintenance-hours NA 400...
Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are...
Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated on the basis of budgeted machine-hours. Personnel Department costs of $100,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Support Departments Production Departments Maintenance Department Personnel Department A B Budgeted costs $300,000 $100,000 $160,000 $240,000 Budgeted maintenance-hours NA 800...
Steven's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are...
Steven's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Support Departments Production Department Maint Department Personnel Department A B Budgeted Costs $320,000 $80,000 $160,000 $240,000 Budgeted Maintenance hours NA...
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing)....
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period: Maintenance Personnel Printing Developing Machine-hours — 1,000 1,000 3,000 Labor-hours 500 — 500 2,000 Department direct costs $ 5,000 $ 12,000 $ 15,000...
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing)....
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period: Maintenance Personnel Printing Developing Machine-hours − 504 648 2,448 Labor-hours 360 − 252 1,188 Department direct costs $ 12,000 $ 27,000 $ 27,000...
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing)....
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period: Maintenance Personnel Printing Developing Machine-hours — 1,000 1,000 3,000 Labor-hours 500 — 500 2,000 Department direct costs $ 5,000 $ 12,000 $ 15,000...
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing)....
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period: Maintenance Personnel Printing Developing Machine-hours — 1,000 1,000 3,000 Labor-hours 500 — 500 2,000 Department direct costs $ 5,000 $ 12,000 $ 15,000...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT