Question

a.)

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments (Mixing Department & Packaging Department.) Annapolis uses a direct allocation method where service departments are allocated only to production departments. All allocations are based on total employees. Computer Operations has costs of $195,000 and Maintenance Services has costs of $130,000 before any allocations. What amount of Maintenance Services total cost is allocated to the Packaging Department? (round to closest whole dollar) Employees are:

            Computer Operations 2

            Maintenance Services 4

Mixing Department 5

Packaging Department 6

b.)

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments (Mixing Department & Packaging Department.) Annapolis uses a step allocation method where the Computer Operations Department is allocated to all departments and Maintenance Services is allocated to the production departments.  All allocations are based on total employees. Computer Operations has costs of $195,000 and Maintenance Services has costs of $160,000 before any allocations. What amount of Maintenance Services total cost is allocated to the Mixing Department? (round to closest whole dollar) Employees are:

            Computer Operations 4

            Maintenance Services 2

Mixing Department 4

Packaging Department 5

Answer 1

The amount of Maintenance Service total cost that is allocated to the Packaging Department = 70,909 $ under direct method.

The amount of Maintenance Service total cost is allocated to the Mixing Department = 86,869 $ under step allocation method.

Under step allocation method, first Computer Operations department is allocated to all other departments first and then the Maintenance Service total cost is allocated.