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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 $ 83,600 Number of employees
Utilities 61,000 Square feet occupied
Insurance 28,000 Value of assets in use
Total $ 172,600


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

Department Employees Square Feet Asset Values
Materials 22 21,000 $ 17,750
Personnel 11 5,250 2,130
Manufacturing 44 68,250 36,210
Packaging 33 10,500 14,910
Total 110 105,000 $ 71,000


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

Supervision expenses Allocation Base Percent of Allocation Base x Indirect Cost Allocated Cost
Department Number of employees Numerator Denominator % of Total
Materials 22 22 110 20% 83600 16720
Personnel 11 11 110 10% 83600 8360
Manufacturing 44 44 110 40% 83600 33440
Packaging 33 33 110 30% 83600 25080
Totals 110 100% 83600
Utilities Allocation Base Percent of Allocation Base x Indirect Cost Allocated Cost
Department Square feet occupied Numerator Denominator % of Total
Materials 21000 21000 105000 20% 61000 12200
Personnel 5250 5250 105000 5% 61000 3050
Manufacturing 68250 68250 105000 65% 61000 39650
Packaging 10500 10500 105000 10% 61000 6100
Totals 105000 100% 61000
Insurance Allocation Base Percent of Allocation Base x Indirect Cost Allocated Cost
Department Value of assets in use Numerator Denominator % of Total
Materials 17750 17750 71000 25% 28000 7000
Personnel 2130 2130 71000 3% 28000 840
Manufacturing 36210 36210 71000 51% 28000 14280
Packaging 14910 14910 71000 21% 28000 5880
Totals 71000 100% 28000
2
Supervision Utilities Insurance Total
Materials 16,720 12,200 7000 35,920
Personnel 8,360 3,050 840 12,250
Manufacturing 33,440 39,650 14,280 87,370
Packaging 25,080 6,100 5,880 37,060
Totals 83,600 61,000 28000 172,600

ekkarill92 answered 2 years ago
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