1.Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria....

1.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	$	95,000
Assembly		68,400
Maintenance		42,400	—	0.2	0.6	0.2
Cafeteria		34,000	0.8	—	0.1	0.1

Compute the allocation of service department costs to producing departments using the direct method

Machine

Assembly

2. Assume that both Machining and Assembly work on just two jobs during the month of August: CM-22 and CM-23. Costs are allocated to jobs based on machine-hours in Machining and labor-hours in Assembly. The number of labor- and machine-hours worked in each department are as follows:

		Machining	Assembly
Job CM-22:	Machine-hours	280	50
	Labor-hours	60	40
Job CM-23:	Machine-hours	20	20
	Labor-hours	30	310

Required:
How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23?

Machine

Assembly

Solutions

Expert Solution

Allocation of Service departmetn cost
			Maintenance	Cafetaria	machining	Assembly
Direct cost		42400	34000
Add: Maintenance cost	-42400		31800	10600
(in the ratio of 6:2)
Add: Cafetaria cost			-34000	17000	17000
(in the ratio of 1:1)
Total Service deptt Cost allocated	0	0	48800	27600

Req 1.
Service department cost allocated:
Machine		48,800
Assemlbly		27,600

Req 2.
			Machining	Assembly
Direct cost		95000	68400
Add: Service cost allocated	48800	27600
Total cost of departments	143800	96000
Divide: Total MH of Machining	300
Divide: Total DLH of Assembly		350
Machining OH per MH	479.33
Assembly Oh per DLH		274.29

OH allocated to Job CM 22:
Machining OH (280 Mh @ 479.33)	134212.4
Assembly OH (40 DLH @ 274.29)	10971.6
Total Overheads allocated to Job CM 22	145184

Oh allocated to Job CM -23
Machining OH (20 Mh @ 479.33)	9586.6
Assembly OH (310 DLH @ 274.29)	85029.9
Total Overheads allocated to Job CM 22	94616.5

Overheads allocated:
Job CM-22	145184
Job CM-23	94616.5

ekkarill92 answered 1 year ago

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