Question

Exercise 9-5 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		Cost	Allocation Base
Supervision	$	84,200	Number of employees
Utilities		67,000	Square feet occupied
Insurance		31,000	Value of assets in use
Total	$	182,200

Departmental data for the company’s recent reporting period follow.

Department	Employees				Square Feet				Asset Values
Materials		34				41,250				$	11,550
Personnel		17				8,250					3,080
Manufacturing		68				90,750					46,200
Packaging		51				24,750					16,170
Total		170				165,000				$	77,000

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.

Use this information to allocate each of the three indirect expenses across the four departments.

Supervision expenses Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials Personnel Manufacturing Packaging Totals Utilities Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials Personnel Manufacturing Packaging Totals Insurance Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials Personnel Manufacturing Packaging Totals

Prepare a summary table that reports the indirect expenses assigned to each of the four departments.

	Supervision Utilities Insurance Total Materials Personnel Manufacturing Packaging Totals

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	34	34	170	20%	84200	16840
Personnel	17	17	170	10%	84200	8420
Manufacturing	68	68	170	40%	84200	33680
Packaging	51	51	170	30%	84200	25260
Totals	170			100%		84200
Utilities	Allocation Base	Percent of Allocation Base			Cost to be allocated	Allocated Cost
Department	Square feet occupied	Numerator	Denominator	% of Total
Materials	41250	41250	165000	25%	67000	16750
Personnel	8250	8250	165000	5%	67000	3350
Manufacturing	90750	90750	165000	55%	67000	36850
Packaging	24750	24750	165000	15%	67000	10050
Totals	165000			100%		67000
Insurance	Allocation Base	Percent of Allocation Base			Cost to be allocated	Allocated Cost
Department	Value of assets in use	Numerator	Denominator	% of Total
Materials	11550	11550	77000	15%	31000	4650
Personnel	3080	3080	77000	4%	31000	1240
Manufacturing	46200	46200	77000	60%	31000	18600
Packaging	16170	16170	77000	21%	31000	6510
Totals	77000			100%		31000
2
	Supervision	Utilities	Insurance	Total
Materials	16840	16750	4650	38240
Personnel	8420	3350	1240	13010
Manufacturing	33680	36850	18600	89130
Packaging	25260	10050	6510	41820
Totals	84200	67000	31000	182200