Question

Amiens Company manufactures both dry and semimoist dog food, with each type of dog food produced in separate departments. Three service departments support the production departments and the data concerning the five departments are as follows:

Service Departments Production Departments

Personnel   Maintenance General Factory Dry Semimost

Overhead costs $60,000 $40,000 $160,000 $120,000        $150,000

Square feet occupied 3,000 2,000 - 6,750 8,250

Machine hours 4,000 - 6,000 36,000 54,000

Number of employees - 14 16 21 35

The personnel costs are allocated on the basis of employees; the maintenance costs on the basis of machine hours; the general factory costs on the basis of space occupied (sq. ft.). The order of allocation is determined based on the dollar amount of service costs rendered to each other. All numbers are rounded to four (4) decimal places if necessary.

If the step method is used, how much cost needs to be allocated from Personnel Department to Semimost Department?

Group of answer choices

$25,200

$24,420

$30,000

$42,000

Answer 1

Answer to Question

Under Step Method of Allocation , Service Department with highest cost is allocated to all Departments ( excluding the service department with highest cost but to remaining service department based on respective variables available for apportionment. Then all cost are added up and the service department with next highest cost is apportionment to rest of all department till all service department cost is eliminated such proces is carried on.

The cost that needs to be allocated from Personnel Department to Semimost Department:

$42,000

					All Figures in($)
	Service	Production
Particulars	Personnel	Maintenance	General Factory	Dry	Semimost
Total Overhead Cost	60000	40000	160000	120000	150000
General Factory Service Dept Cost Allocated	24000	16000	(160,000)	54000	66000
	[160000 x 3/20]	[160000 x 2/20]		[160000 x 6.75/20]	[160000 x 8.25/20]
(allocated in the ratio sq feet)
Total	84000	56000	0	174000	216000
Personnel Service Dept Cost Allocated	(84,000)	16800		25200	42000
		[84000 X 14/70]		[84000 X 21/70]	[84000 X 35/70]
Total Cost after allocation of Personnel Dept Cost	0	72,800	0	199,200	258,000