In: Accounting
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.
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.