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In: Accounting

Shannon Company allocates in indirect costs on the following bases: 1. Janitors wages and rent of...

Shannon Company allocates in indirect costs on the following bases:

1. Janitors wages and rent of building on the basis of floor space

2. Electricity, gas, water, and miscellaneous factory costs on the basis of percentages given

3. Maintenance department costs on the basis of chargeable maintenance hours

4. Storeroom department costs on the basis of proportion of number of requisitions

Management has hired you as a consultant to prepare a schedule of allocated costs. Use the step-method to allocate service department costs to production departments, starting with maintenance department.

Partially Completed Overhead Allocation Schedule
Total Dept. A Dept. B Dept. C Dept. S
Storeroom
Dept. M
Maintenance
Indirect Costs
Not Assigned to
Any Department
Maintenance Wages $1,800 $1,800

Storeroom Wages

1,000 $1,000
(1) Janitor's Wages 1,000 $1,000
Supplies Used 1,400 $200 $300 $100 600 200
(1) Rent-Factory Building 2,000 2,000
(2) Electricity, Gas, & Water 200 200
(2) Miscellaneous Factory
Costs 600 600
Total $8,000
Total Dept. A Dept. B Dept. C Storeroom Maintenance
Floor Space (square feet) 50,000 16,000 11,000 20,000 2,000 1,000
Chargeable Maintenance Hours 500 150 200 100 50
Requisitions Drawn 200 140 40 20
Other Distribution Data
Electricity, Gas, Water, & Misc
100% 30% 30% 20% 10% 10%

Please be detailed, I have the answer from the book but I don't have an explanation as to why that is the answer. Thank you.

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