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Exercise 11-33 Cost Allocation: Reciprocal Method (LO 11-4) University Printers has two service departments (Maintenance and...

Exercise 11-33 Cost Allocation: Reciprocal Method (LO 11-4)

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:

Maintenance Personnel Printing Developing
Machine-hours ? 455 455 2,590
Labor-hours 315 ? 294 1,491
Department direct costs $ 11,000 $ 23,000 $ 25,000 $ 23,000

Required:

Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

Solutions

Expert Solution

The key to using the reciprocal method is to keep reallocating the two service department (maintenance and personnel) costs until the service departments reach a zero balance.
Machine hour percentages--Allocation of Maintenance Costs
455 + 455 + 2,590 = 3,500 total machine hrs
Personnel
455 / 3,500 = 13%
Printing
455 / 3,500 = 13%
Developing
2,590 / 3,500 = 74%
Labor hr. percentages--Allocation of Personnel costs
315 + 294 + 1,491 = 2,100 total labor hrs.
Maintenance
315 / 2,100 = 15%
Printing
294 / 2,100 = 14%
Developing
1,491 / 2,100 = 71%
Service
Maintenance Personnel Printing Developing
Costs before allocation 11000 23000 25000 23000
Allocate maintenance costs -11000 1430 1430 8140
(11000X13%) (11000X13%) (11000X74%)
0 24430
Allocate personnel costs 3664.5 -24430 3420.2 17345.3
(24430X15%) (24430X14%) (24430X71%)
Allocate maintenance costs -3664.5 476.39 476.39 2711.73
(3664.5X13%) (3664.5X13%) (3664.5X74%)
Allocate personnel costs 71.46 -476.39 66.69 338.24
(476.39X15%) (476.39X14%) (476.39X71%)
Allocate maintenance costs -71.46 9.29 9.29 52.88
(71.46X13%) (71.46X13%) (71.46X74%)
Allocate personnel costs 1.39 -9.29 1.3006 6.5959
(9.29X15%) (9.29X14%) (9.29X71%)
Allocate maintenance costs -1.39 0 0 1.39
Total costs 0.00 0.00 30403.87 51596.13

ekkarill92 answered 1 year ago
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