Question

In: Accounting

19) Christina Company has two service departments, Maintenance and Human Resources. Christina Company also has two...

19) Christina Company has two service departments, Maintenance and Human Resources. Christina Company also has two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees. The following information has been gathered for the current year:

                                                                       Human

                                         Maintenance         Resources              Mixing          Finishing

Direct costs                                $50,400             $33,600              $42,000             $70,000

Square footage                              1,600                   800                 3,200                 2,400

Number of employees                       16                     24                     48                     64

Assume the step-down method is used to allocate service department costs and the Human Resources Department is allocated first. Then the cost allocated from the Human Resources Department to the Maintenance Department is ________.

A) $0

B) $3,539

C) $4,200 this is correct, please explain why, and SHOW all work. Thank you!

D) $13,440

Solutions

Expert Solution

Correct option is: C. $4,200
Workings:
Proportion of Driver used by
From Maintenance Human Resource Mixing Finishing
Maintenance 0 0 57.14% 42.86%
3200/(3200+2400) 2400/(3200+2400)
Human Resource 12.50% 0 37.50% 50.00%
16/(16+48+64) 48/(16+48+64) 64/(16+48+64)
Support Department Producing Department
Maintenance Human Resource Mixing Finishing
Direct costs $                                           50,400 $                33,600 $                                    42,000 $                                      70,000
Allocate:
Human Resource (12.50 : 37.50 : 50) $                                             4,200 $              -33,600 $                                    12,600 $                                      16,800
Maintenance (57.14 : 42.86) $                                         -54,600 0                                        31,200                                          23,400
Total after allocation 0 0 $                                    85,800 $                                  1,10,200
Human Resource allocated to maintenance = $33600 X 12.50%
= $                  4,200

ekkarill92 answered 2 years ago
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