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 $ 84,500 Number of employees Utilities 70,000 Square feet occupied Insurance 32,500 Value of assets in use Total $ 187,000 Departmental data for the company’s recent reporting period follow Department Employees Square Feet Asset Values Materials 40 39,000 $ 12,000 Personnel 10 19,500 1,600 Manufacturing 84 107,250 47,200 Packaging 66 29,250 19,200 Total 200 195,000 $ 80,000 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.
1 | ||||||
Supervision expenses | Allocation Base | Percent of Allocation Base | Cost to be allocated | Allocated Cost | ||
Department | Number of employees | Numerator | Denominator | % of Total | ||
Materials | 40 | 40 | 200 | 20% | 84500 | 16900 |
Personnel | 10 | 10 | 200 | 5% | 84500 | 4225 |
Manufacturing | 84 | 84 | 200 | 42% | 84500 | 35490 |
Packaging | 66 | 66 | 200 | 33% | 84500 | 27885 |
Totals | 200 | 100% | 84500 | |||
Utilities | Allocation Base | Percent of Allocation Base | Cost to be allocated | Allocated Cost | ||
Department | Square feet occupied | Numerator | Denominator | % of Total | ||
Materials | 39000 | 39000 | 195000 | 20% | 70000 | 14000 |
Personnel | 19500 | 19500 | 195000 | 10% | 70000 | 7000 |
Manufacturing | 107250 | 107250 | 195000 | 55% | 70000 | 38500 |
Packaging | 29250 | 29250 | 195000 | 15% | 70000 | 10500 |
Totals | 195000 | 100% | 70000 | |||
Insurance | Allocation Base | Percent of Allocation Base | Cost to be allocated | Allocated Cost | ||
Department | Value of assets in use | Numerator | Denominator | % of Total | ||
Materials | 12000 | 12000 | 80000 | 15% | 32500 | 4875 |
Personnel | 1600 | 1600 | 80000 | 2% | 32500 | 650 |
Manufacturing | 47200 | 47200 | 80000 | 59% | 32500 | 19175 |
Packaging | 19200 | 19200 | 80000 | 24% | 32500 | 7800 |
Totals | 80000 | 100% | 32500 | |||
2 | ||||||
Supervision | Utilities | Insurance | Total | |||
Materials | 16900 | 14000 | 4875 | 35775 | ||
Personnel | 4225 | 7000 | 650 | 11875 | ||
Manufacturing | 35490 | 38500 | 19175 | 93165 | ||
Packaging | 27885 | 10500 | 7800 | 46185 | ||
Totals | 84500 | 70000 | 32500 | 187000 |