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Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the...

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 $ 82,600 Number of employees
Utilities 51,000 Square feet occupied
Insurance 23,000 Value of assets in use
Total $ 156,600


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

Department Employees Square Feet Asset Values
Materials 24 22,000 $ 6,100
Personnel 6 11,000 1,830
Manufacturing 48 55,000 36,600
Packaging 42 22,000 16,470
Total 120 110,000 $ 61,000


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.
  

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement 1

Supervision

Allocation base

% of allocation base

Cost to be allocated

Allocated cost

Department:

No. of employees

Numerator

Denominator

% of total

   Materials

No. of employees

                      24

                    120

20.00%

$     82,600.00

$    16,520.00

   Personnel

No. of employees

                        6

                    120

5.00%

$     82,600.00

$      4,130.00

   Manufacturing

No. of employees

                      48

                    120

40.00%

$     82,600.00

$    33,040.00

   Packaging

No. of employees

                      42

                    120

35.00%

$     82,600.00

$    28,910.00

Totals

                    120

$    82,600.00

Utilities

Allocation base

% of allocation base

Cost to be allocated

Allocated cost

Department:

Sq Feet acquired

Numerator

Denominator

% of total

   Materials

Sq Feet acquired

              22,000

           110,000

20%

$     51,000.00

$    10,200.00

   Personnel

Sq Feet acquired

              11,000

           110,000

10%

$     51,000.00

$      5,100.00

   Manufacturing

Sq Feet acquired

              55,000

           110,000

50%

$     51,000.00

$    25,500.00

   Packaging

Sq Feet acquired

              22,000

           110,000

20%

$     51,000.00

$    10,200.00

Totals

           110,000

$    51,000.00

Insurance

Allocation base

% of allocation base

Cost to be allocated

Allocated cost

Department:

Asset Values

Numerator

Denominator

% of total

   Materials

Asset Values

                6,100

              61,000

10%

$     23,000.00

$      2,300.00

   Personnel

Asset Values

                1,830

              61,000

3%

$     23,000.00

$          690.00

   Manufacturing

Asset Values

              36,600

              61,000

60%

$     23,000.00

$    13,800.00

   Packaging

Asset Values

              16,470

              61,000

27%

$     23,000.00

$      6,210.00

Totals

              61,000

$    23,000.00

  • Requirement 2

Expense Totals

Supervision

Utilities

Insurance

    Materials

    Personnel

   Manufacturing

   Packaging

Total Overhead Costs

$      156,600.00

$    82,600.00

$    51,000.00

$           23,000.00

$                    -  

$                   -  

Department cost allocation, as above:

Supervision

$ (82,600.00)

$     16,520.00

$      4,130.00

$          33,040.00

$ 28,910.00

Utilities

$ (51,000.00)

$                          -  

$     10,200.00

$      5,100.00

$          25,500.00

$ 10,200.00

Insurance

$         (23,000.00)

$       2,300.00

$          690.00

$          13,800.00

$    6,210.00

Total Expense allocated

$      156,600.00

$                    -  

$                    -  

$                          -  

$     29,020.00

$      9,920.00

$          72,340.00

$ 45,320.00


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