Question

In: Accounting

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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