Question

Won Han 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	$	70,000	Number of employees
Utilities		64,000	Square feet occupied
Insurance		17,000	Value of assets in use
Total	$	151,000

    

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

    

Department	Employees			Square Feet			Asset Values
Materials		18			29,000		$	34,000
Personnel		8			4,700			1,200
Manufacturing		65			50,000			38,300
Packaging		32			13,500			14,800
Total		123			97,200		$	88,300

   

(1)	Use this information to allocate each of the three indirect expenses across the four departments. (Round your intermediate and final answers to the nearest whole dollar. Omit the "$" & "%" signs in your response.)

   

Supervision expenses
Department	% of Total	Cost
Materials	%	$
Personnel
Manufacturing
Packaging
Totals	%	$

   

Utilities expenses
Department	% of Total	Cost
Materials	%	$
Personnel
Manufacturing
Packaging
Totals	%	$

   

Insurance expenses
Department	% of Total	Cost
Materials	%	$
Personnel
Manufacturing
Packaging
Totals	%	$

  

(2)	Prepare a summary table that reports the indirect expenses assigned to each of the four departments. (Round your intermediate and final answers to the nearest whole dollar. Omit the "$" sign in your response.)

	Supervision	Utilities	Insurance	Total
Materials	$	$	$	$
Personnel
Manufacturing
Packaging
Totals	$	$	$	$

Answer 1

1) Allocation of Supervision Expenses (Amounts in $)

Departments	No. of Employees	Percent of Allocation Base (A) (%)	Indirect Cost (B)	Allocated Cost (A*B)
Materials	18	(18/123) = 14.63	70,000	10,241
Personnel	8	(8/123) = 6.50	70,000	4,550
Manufacturing	65	(65/123) = 52.85	70,000	36,995
Packaging	32	(32/123) = 26.02	70,000	18,214
Totals	123	100		70,000

Allocation of Utilities Expenses (Amounts in $)

Departments	Square Feet	Percent of Allocation Base (A) (%)	Indirect Cost (B)	Allocated Cost (A*B)
Materials	29,000	(29,000/97,200) = 29.84	64,000	19,098
Personnel	4,700	(4,700/97,200) = 4.83	64,000	3,091
Manufacturing	50,000	(50,000/97,200) = 51.44	64,000	32,921
Packaging	13,500	(13,500/97,200) = 13.89	64,000	8,890
Totals	97,200	100		64,000

Allocation of Insurance Expenses (Amounts in $)

Departments	Asset Values	Percent of Allocation Base (A) (%)	Indirect Cost (B)	Allocated Cost (A*B)
Materials	34,000	(34,000/88,300) = 38.51	17,000	6,547
Personnel	1,200	(1,200/88,300) = 1.36	17,000	231
Manufacturing	38,300	(38,300/88,300) = 43.37	17,000	7,373
Packaging	14,800	(14,800/88,300) = 16.76	17,000	2,849
Totals	88,300	100		17,000

2) Summary Table showing indirect costs for each department (Amts in $)

Departments	Supervision	Utilities	Insurance	Total
Materials	10,241	19,098	6,547	35,886
Personnel	4,550	3,091	231	7,872
Manufacturing	36,995	32,921	7,373	77,289
Packaging	18,214	8,890	2,849	29,953
Totals	70,000	64,000	17,000	151,000