Question

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 $165,000 and Maintenance Services has costs of $155,000 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 3

Mixing Department 4

Packaging Department 5

Answer 1

It is given in question that Computer Operations Department is allocated to all departments whereas Maintainance Service cost is allocated to Production departments only.

	Service Department	Production Department
	Computer Operations	Maintainance Services	Mixing Department	Packaging Department
No. Of Employees	4	3	4	5
Cost	$1,65,000	$1,55,000
Allocation of Computer Operations Cost in all departments on the basis of employees
Cost		$41,250	$55,000	$68,750
		(165000$ * 3/12)	(165000$ * 4/12)	(165000$ * 5/12)
Allocation of Maintainence Services Cost in production departments on the basis of employees( 155000+ 41250= 196250 $)
Cost			$87,222	$1,09,028
			(196250 $ *4/9)	(196250 $ *5/9)

Maintainance Service Total Cost Allocated to Mixing Department : 87,222 $