Question

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		—			1,400			1,400			4,200
Labor-hours		900			—			900			3,100
Department direct costs	$	2,800		$	12,800		$	14,500		$	11,700

Required:

Allocate the service department costs using the step method, starting with the Maintenance Department. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

		Maintenance	Personnel	Printing	Developing
	Service department costs	$2,800	$12,800	$0	$0
	Maintenance	-2,800	560	$560	$1,680
	Personnel		-13,360	2,672	10,688
	Total costs allocated	0	0	3232	12368

Answer 1

	Maintenance	Personnel	Printing	Developing
Service Department Cost	$    2,800	$    12,800
Maintenance	- $ 2,800	$    560	$    560	$    1,680
Personnel		- $ 13,360	$    3,006	$    10,354
Total Allocated Cost	0	0	$    3,566	$    12,034
Explanation :-
Total Machine Hours = 1,400 + 1,400 + 4,200 = 7,000
Maintenance Cost = $ 2,800
Personal Department = ( 1,400 / 7,000) *$ 2,800 = $ 560
Printing Department = ( 1,400 /7,000 ) * $ 2,800 = $ 560
Developing Department = ( 4,200 / 7,000) * $ 2,800 = $ 1,680
Personnel = $ 12,800 + $ 560( allocated from maintenance) = $ 13,360
Printing Department = ( 900 / 900 + 3,100) * $ 13,360 = $ 3,006
Developing Department = ( 3,100 / 900 + 3,100 ) * $ 13,360 = $ 10,354

Thank You !