Question

In: Accounting

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing)....

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 − 640 520 2,840
Labor-hours 399 − 357 1,344
Department direct costs $ 11,000 $ 22,000 $ 30,000 $ 18,000

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. Round your final answers to the nearest whole dollar amounts.)

Cost Allocation To:
From: Maintenance Personnel Printing Developing
Service department costs
Maintenance
Personnel
Total $0 $0 $0 $0

Solutions

Expert Solution

Allocation of service department cost using the reciprocal method :

Particular Printing Developing Total
Departmental direct costs 30000 18000 48000
Allocation of costs of maintenace department (13% & 71%) 1673 9138 10811
( see working) (12871 * 13%) (12871 * 71%)
Allocation of cost of personnel department 4090 15398 19488
( see working ) ( 24059 * 17%) (24059 * 64%)
Total 35763 42536
Hence ,
From Maintenance Personnel Printing Developing
Service department Costs 11000 22000 30000 18000
Mainteneance -12871 2059 1673 9138
Personnel 1871 -24059 4090 15398
Total 0 0 35763 42536
Computation of allocation basis
Maintenance Personnel Printing Developing Total
Machine hours 0 640 520 2840 4000
(%) 16% 13% 71% 100%
Labor hours 399 0 357 1344 2100
(%) 19% 17% 64% 100%
Departmental Direct costs 11000 22000 30000 18000 81000

Working :

Let M = Maintenance department

P = Personnel Department

M = 11000 + 0.19 P

P = 22000 + 0.16M

Solving the above equation

M = 11000 + 0.19 ( 22000 + 0.16 M)

M = 11000 + 4180 + 0.0304 M

0.9696 M = 12480

M = 12871

P = 22000 + 0.16 ( 12871 )

P = 24059

ekkarill92 answered 10 months ago
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