Question

Can you show me the steps it takes to do a direct allocation based on the following criteria:

	Maintenance			Personnel			Printing			Developing
Machine-hours		—			1,000			1,000			3,000
Labor-hours		500			—			500			2,000
Department direct costs	$	5,000		$	12,000		$	15,000		$	10,00

Answer 1

	Maintenance	Personnel	Printing	Developing
Service Department cost	$                5,000	$              12,000
Maintenance allocation	$               -5,000		$                1,250	$                3,750
Personnel allocation		$            -12,000	$                2,400	$                9,600
	$                       -	$                       -	$                3,650	$              13,350
Workings:
	Printing		Developing
Maintenance allocation	$5,000 X [1,000 / (1,000 + 3,000)]		$5,000 X [3,000 / (1,000 + 3,000)]
	$1,250		$3,750
Maintenance department cost is allocated in the ratio of Machine - hours between printing and developing.
Personnel allocation	$12,000 X [500 / (500 + 2,000)]		$12,000 X [2,000 / (500 + 2,000)]
	$2,400		$9,600
Personnel department cost is allocated in the ratio of Labour - hours between printing and developing.