Question

In: Accounting

a. Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and...

a. 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 $ 98,000
Assembly 74,400
Maintenance 46,000 — 0.2 0.6 0.2
Cafeteria 37,000 0.6 — 0.1 0.3

Exercise 11-27 (Algo) Cost Allocation: Direct Method (LO 11-2)

Required:

Compute the allocation of service department costs to producing departments using the direct method. (Do not round intermediate calculations.)

b. Assume that both Machining and Assembly work on just two jobs during the month of August: CM-22 and CM-23. Costs are allocated to jobs based on machine-hours in Machining and labor-hours in Assembly. The number of labor- and machine-hours worked in each department are as follows:

Machining Assembly
Job CM-22: Machine-hours 230 60
Labor-hours 20 20
Job CM-23: Machine-hours 20 40
Labor-hours 30 100

Required:
How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23?

Solutions

Expert Solution

>All working forms part of the answer

  • Requirements asked

[1]

Direct Cost

Maintenance Cost

Cafetaria Cost

Total Costs = ANSWER

Machining

$98,000

$34,500

[46000 x 0.6/0.8]

$9,250

[$37000 x 0.1/0.4]

$141,750

Assembly

$74,400

$11,500

[46000 x 0.2/0.8]

$27,750

[$37000 x 0.3/0.4]

$113,650

--Workings

Machining

Assembly

Total Cost

$141,750

$113,650

Allocation base

Machine hours

Labor hours

Amount of allocation base

250

120

Allocation rate

$                     567.00

$                                  947.08

[2]

Job CM 22

Job CM 23

Total Answer

Machining

$130,410.00

[230 MHs x $ 567]

$11,340.00

[20 MHs x $ 567]

141,750.00

Assembly

$18,941.60

[20 LHs x $ 947.08]

$94,708.00

[100 LHs x $ 947.08]

113,649.60

Answer

$149,351.60

$106,048.00

ekkarill92 answered 7 months ago
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