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Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the...

Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Indirect Expense Cost Allocation Base
Supervision $ 84,500 Number of employees
Utilities 70,000 Square feet occupied
Insurance 32,500 Value of assets in use
Total $ 187,000


Departmental data for the company’s recent reporting period follow.

Department Employees Square Feet Asset Values
Materials 40 39,000 $ 12,000
Personnel 10 19,500 1,600
Manufacturing 84 107,250 47,200
Packaging 66 29,250 19,200
Total 200 195,000 $ 80,000


1. Use this information to allocate each of the three indirect expenses across the four departments.
2. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.
  

Solutions

Expert Solution

Answer to Part 1
Super Vision Expenses Allocation Base Percentage of Allocation Indirect Cost Allocated Cost
Department Number of Employees Numerator Denominator % of Total (Indirect Cost*% of Total)
Materials 40 40 200 20% 84500 16900
Personnel 10 10 200 5% 84500 4225
Manufacturing 84 84 200 42% 84500 35490
Packaging 66 66 200 33% 84500 27885
Total 200 84500
Utilities Allocation Base Percentage of Allocation Indirect Cost Allocated Cost
Department Square Feet Occupied Numerator Denominator % of Total
Materials 39000 39000 195000 20% 70000 14000
Personnel 19500 19500 195000 10% 70000 7000
Manufacturing 107250 107250 195000 55% 70000 38500
Packaging 29250 29250 195000 15% 70000 10500
Total 195000 70000
Insurance Allocation Base Percentage of Allocation Indirect Cost Allocated Cost
Department Asset Value Numerator Denominator % of Total
Materials 12000 12000 80000 15% 32500 4875
Personnel 1600 1600 80000 2% 32500 650
Manufacturing 47200 47200 80000 59% 32500 19175
Packaging 19200 19200 80000 24% 32500 7800
Total 80000 32500
Answer to Part 2:
Super Vision Expenses Utilities Insurance Total
Materials 16900 14000 4875 35775
Personnel 4225 7000 650 11875
Manufacturing 35490 38500 19175 93165
Packaging 27885 10500 7800 46185
84500 70000 32500 187000

ekkarill92 answered 2 years ago
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