Question

The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production departments — fabrication and assembly. The distribution of each service department's efforts to the other departments is shown below:

FROM	TO
	Purchasing			Maintenance			Fabrication			Assembly
Purchasing		0	%		15	%		75	%		10	%
Maintenance		55	%		0	%		35	%		10	%

The direct operating costs of the departments (including both variable and fixed costs) were as follows:

Purchasing	$	156,000
Maintenance		78,000
Fabrication		132,000
Assembly		108,000

The total cost accumulated in the assembly department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Multiple Choice

• $322,417.

• $327,867.

• $158,583.

• $152,833.

• $146,133.

Answer 1

Correct option is: E. $146,133
Workings:
	Proportion of Driver used by
From	Purchasing	Maintenance	Fabrication	Assembly
Purchasing	0	15%	75%	10%
Maintenance	0	0	77.7778%	22.2222%
	Support Department		Producing Department
	Purchasing	Maintenance	Fabrication	Assembly
Direct costs	$                       1,56,000	$          78,000	$                           1,32,000	$ 1,08,000
Allocate:
Purchasing	$                     -1,56,000	$          23,400	$                           1,17,000	$     15,600
Maintenance	0	$     -1,01,400	$                               78,867	$     22,533
Total after allocation	0	0	$                           3,27,867	$ 1,46,133