Question

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $300,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $100,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:

	Support Departments		Production Departments
	Maintenance Department	Personnel Department	A	B
Budgeted costs	$300,000	$100,000	$160,000	$240,000
Budgeted maintenance-hours	NA	800	1,200	600
Number of employees	50	NA	200	600

4) Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

A) $96,000

*B) $100,000

C) $110,000

D) $122,000

5) Using the direct method, what amount of Personnel Department costs will be allocated to Department B? $75,000

6) Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

A) $84,143

B) $69,231

C) $66,734

D) $71,443

7) Using the direct method, what amount of Maintenance Department costs will be allocated to Department A?

8) Using the direct method, what amount of Personnel Department costs will be allocated to Department A?

A) $25,000

B) $28,000

C) $30,000

D) $20,000

9) Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

Answer 1

4)

$100,000

Explanation:-

Total machine hours = 1,200 + 600 = 1,800 hours

Maintenance Department cost allocated to Department B = (Total Maintenance cost/Total machine hours) × Department B machine hours

Maintenance Department cost allocated to Department B = ($300,000/1,800) × 600

Maintenance department cost allocated to department B = $100,000

5)

$75,000

Explanation:-

Total number of Employees = 200 + 600 =800

Personnel department cost allocated to Department B = (Total Personnel cost/Total number of employees) × Department B number of employees

Personnel department cost allocated to department B = ($100,000/800) × 600

Personnel department cost allocated to department B = $75,000

6)

$69,231

Explanation:-

Maintenance Provided to personnel = 800/(800+1200+600)

Maintenance provided to personnel = 800/2,600

Maintenance provided to personnel = 0.308

Personnel provided to maintenance = 50/(200+600+50)

Personnel provided to maintenance = 50/850

Personnel provided to maintenance = 0.059

Maintenance provide the greatest amount of service to support departments, so it is allocated first

Department B = (600/2,600) ×$300,000

Department B = $69,231

7)

$200,000

Explanation:-

Total machine hours = 1,200 + 600 = 1800

Maintenance department cost allocated to department A = (Total Maintenance cost/ Total machine hours) × Department A Machine hours

Maintenance department cost allocated to department A = ($300,000/1,800) ×1,200

Maintenance department cost allocated to department A = $200,000

8)

$25,000

Explanation:-

Total Number of Employees = 200 + 600 = 800

Personnel department cost allocated to department A = (Total personnel cost/ Total number of employees) × Department A number of employees

Personnel department cost allocated to department A = ($100,000/800) ×200

Personnel department cost allocated to department A = $25,000

9)

$138,462

Explanation:-

Total Maintenance hours = 800 +1,200 +600 = 2,600 hours

Maintenance department cost = $300,000

Department A hours = 1,200 hours

Maintenance cost to be allocated = (Maintenance department cost/ Total machine hours) × Department A hours

Maintenance cost to be allocated = ($300,000/2,600) ×1,200

Maintenance cost to be allocated = $138,462