In: Accounting
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.
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 |
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 |