Question

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:

				Proportion of Services Used by
Department	Direct Costs			Maintenance		Cafeteria		Machining		Assembly
Machining	$	96,000
Assembly		70,400
Maintenance		43,600		—		0.2		0.5		0.3
Cafeteria		35,000		0.6		—		0.2		0.2

Assume that both Machining and Assembly work on just two jobs during the month of August: CM-22 and CM-23. Costs are allocated to jobs based on machine-hours in Machining and labor-hours in Assembly. The number of labor- and machine-hours worked in each department are as follows:

		Machining		Assembly
Job CM-22:	Machine-hours	320		60
	Labor-hours	50		20
Job CM-23:	Machine-hours	40		50
	Labor-hours	30		220

Required:
How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23? (Round "Department rate" to 2 decimal places.)

Answer 1

		Caro Manufacturing
	Working
		Machining	Assembly	Total
	Cost allocated to each department	$                       96,000.00	$             70,400.00	$ 1,66,400.00
	Allocation Basis
	Job CM-22(Machine Hours)	320
	Job CM-23(Machine Hours)	40
	Job CM-22(Labor Hours)		20
	Job CM-23(Labor Hours)		220
	Total of Allocation Basis	360	240
	Cost per allocation base	$                             266.67	$                   293.33
		(Per Machine Hours)	(Per Labor Hours)
	Department Rates=	($96000/360)	($70400/240)
	Cost assigned to Jobs	Job CM-22	Job CM-23
	Machining(320*$266.67)	$                       85,333.33
	Assembly(20*$293.33)	$                          5,866.67
	Machining(40*$266.67)		$             10,666.67
	Assembly(220*$293.33)		$             64,533.33
	Total	$                       91,200.00	$             75,200.00
	Total Cost allocated to Jobs=($91200+$75200)=	$                    1,66,400.00
Ans)		Machining	Assembly
	Total Allocation Base	360	240
	Department Rate	$                             266.67	$                   293.33
		Job CM-22	Job CM-23
	Machining	$                             85,333	$                   10,667
	Assembly	$                                5,867	$                   64,533