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		—			1,000			1,000			3,000
Labor-hours		500			—			500			2,000
Department direct costs	$	5,000		$	12,000		$	15,000		$	10,000

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.)

Answer 1

Particulars			Maintenance	Personnel	Printing	Developing
Service Dept Costs			$   5,000.00	$ 12,000.00
Allocating cost of :
Maintenance Dept			$ (5,000.00)	$    1,000.00	$   1,000.00	$   3,000.00
Personnel			$               -	$(13,000.00)	$   2,600.00	$ 10,400.00
Total Costs allocated			$               -	$                -	$   3,600.00	$ 13,400.00

Workings:
Allocating Cost of Maintenance Dept to:
Personnel			$   1,000.00	($ 5000 x 1000/5000)
Printing			$   1,000.00	($ 5000 x 1000/5000)
Developing			$   3,000.00	($ 5000 x 3000/5000)
Allocating Cost of Personnel Dept to:
Printing			$   2,600.00	($ 13000 x 500/2500)
Developing			$ 10,400.00	($ 13000 x 2000/2500)