Question

In: Accounting

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments...

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments (Mixing Department & Packaging Department.) Annapolis uses a step allocation method where the Computer Operations Department is allocated to all departments and Maintenance Services is allocated to the production departments.  All allocations are based on total employees. Computer Operations has costs of $195,000 and Maintenance Services has costs of $155,000 before any allocations. What amount of Maintenance Services total cost is allocated to the Mixing Department? (round to closest whole dollar) Employees are:

            Computer Operations 3

            Maintenance Services 2

Mixing Department 6

Packaging Department 6

Solutions

Expert Solution

Cost allocation ratio of Computer Service department to all department
Maintenance Mixing Packaging Total
Number of employees 2 6 6 14
Divide: Total Number of employees in Production 14 14 14 14
Cost allocation ratio 14.29% 42.86% 42.86% 100.00%
Cost of Computer service allocated to Maintence = 195000*14.29% = 27865
Total cost of Maintenance service department to be allocated to Prod. (27865+155000) 182865
Cost allocation ratio of MaintenanceService department to Production Department
Mixing Packaging Total
Number of employees 6 6 12
Divide: Total Number of employees in Production 12 12 12
Cost allocation ratio 50% 50%
Total Maintenance Service cost 182865
Multiply: Cost allocation ratio of Mixing 50%
Cost allocated to Mixing department 91433
Answer is $ 91433

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