Question

In: Accounting

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

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 $ 108,000
Assembly 78,400
Maintenance 48,400 — 0.2 0.6 0.2
Cafeteria 39,000 0.8 — 0.1 0.1

Required:

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

Solutions

Expert Solution

Machining $           55,800.00
Assembly $           31,600.00

Working :

Maintenance Cafeteria Machining Assembly
Service Department Cost $            48,400.00 $           39,000.00 $                           -   $                     -  
Maintenance $           (48,400.00)

$             36,300.00

(48400*0.6/(0.6+0.2))

$      12,100.00

(48400*0.2/(0.6+0.2))
Cafeteria $          (39,000.00)

$             19,500.00

(39000*0.1/(0.1+0.1))

$      19,500.00

(39000*0.1/(0.1+0.1))
Total $            55,800.00 $      31,600.00

ekkarill92 answered 2 years ago
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