Question

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

Answer 1

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