Question

Exercise 22-5 Departmental expense allocations LO P2

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	$	82,800	Number of employees
Utilities		53,000	Square feet occupied
Insurance		24,000	Value of assets in use
Total	$	159,800

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

Department	Employees				Square Feet				Asset Values
Materials		28				39,000				$	12,600
Personnel		7				6,500					3,150
Manufacturing		63				65,000					31,500
Packaging		42				19,500					15,750
Total		140				130,000				$	63,000

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.

Use this information to allocate each of the three indirect expenses across the four departments.

Supervision expenses Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials Personnel Manufacturing Packaging Totals Utilities Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials Personnel Manufacturing Packaging Totals Insurance Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials Personnel Manufacturing Packaging Totals

Prepare a summary table that reports the indirect expenses assigned to each of the four departments

	Supervision Utilities Insurance Total Materials Personnel Manufacturing Packaging Totals

Answer 1

Supervision Expenses	Allocation Base	percent of allocaion base			cost to be allocated	Allocated Cost
Deaprtment	No. of Employees	Numerator	Denominator	% of Total
material	28	28	140	20%	82,800	16,560
personnel	7	7	140	5%	82,800	4,140
manufacturing	63	63	140	45%	82,800	37,260
packaging	42	42	140	30%	82,800	24,840
total	140			100%		82,800
Utilities	Allocation Base	percent of allocaion base			cost to be allocated	Allocated Cost
Deaprtment	Square feet occupied	Numerator	Denominator	% of Total
material	39,000	39,000	130,000	30%	53,000	15,900
personnel	6,500	6,500	130,000	5%	53,000	2,650
manufacturing	65,000	65,000	130,000	50%	53,000	26,500
packaging	19,500	19,500	130,000	15%	53,000	7,950
total	130,000			100%		53,000
Insurance	Allocation Base	percent of allocaion base			cost to be allocated	Allocated Cost
Deaprtment	Value of assets in use	Numerator	Denominator	% of Total
material	12,600	12,600	63,000	20%	24,000	4,800
personnel	3,150	3,150	63,000	5%	24,000	1,200
manufacturing	31,500	31,500	63,000	50%	24,000	12,000
packaging	15,750	15,750	63,000	25%	24,000	6,000
total	63,000			100%		24,000
	Supervision	Utilities	insurance	Total
Material	16,560	15,900	4,800	37,260
personnel	4,140	2,650	1,200	7,990
Manufacturing	37,260	26,500	12,000	75,760
packaging	24,840	7,950	6,000	38,790
Total	82,800	53,000	24,000