Question

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:

				Proportion of Services Used by
Department	Direct Costs			Maintenance		Cafeteria		Machining		Assembly
Machining	$	100,000
Assembly		68,000
Maintenance		54,000		—		0.3		0.4		0.3
Cafeteria		41,000		0.6		—		0.2		0.2

Required:

Use the reciprocal method to allocate the service costs. (Matrix algebra is not required.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

Cost allocation to:

From: Maintenance Cafeteria Machining Assembly

Service department costs

Maintenance

Cafeteria

Total $ $ $ $

Answer 1

	To
From	Maintenance	Cafeteria	Machining	Assembly
Service Departmentl costs	$          54,000	$     41,000
Maintenance (3:4:3)	$        -95,854	$     28,756	$                       38,342	$                        28,756
Cafeteria (6:2:2)	$          41,854	$   -69,756	$                       13,951	$                        13,951
Total Cost	$                    0	$               0	$                       52,293	$                        42,707
Note: Must include minus sign while posting answer
Workings:
Let Total Service department cost of Maintenance be x and of Cafeteria be y
x = 54000 + (0.60 y)
y = $41000 + (0.30 x)
By solving above:
y = $41000 + [0.30 * (54000 + 0.60y)]
y = $41000 + 16200 + 0.18y
y = $69756
also,
x = 54000 + (0.60 y)
x = 54000 + (0.60*$69756)
x = $95854