Question

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	$	82,500	Number of employees
Utilities		50,000	Square feet occupied
Insurance		22,500	Value of assets in use
Total	$	155,000
Departmental data for the company’s recent reporting period follow. Department Employees Square Feet Asset Values Materials 27 25,000 $ 6,000 Personnel 9 5,000 1,200 Manufacturing 63 55,000 37,800 Packaging 51 15,000 15,000 Total 150 100,000 $ 60,000 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. Supervision expenses Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Number of employees Numerator Denominator % of Total Materials 0 Personnel 0 Manufacturing 0 0 Packaging 0 Totals 0 Utilities Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials 0 Personnel 0 Manufacturing 0 0 Packaging 0 Totals 0 Insurance Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Materials 0 Personnel 0 Manufacturing 0 0 Packaging 0 Totals 0

	Supervision Utilities Insurance Total Materials $0 Personnel 0 Manufacturing 0 Packaging 0 Totals $0 $0 $0 $0

Answer 1

Solution 1:

Supervision Expenses	Allocation Base	Percentage of allocation base			Cost to be allocated	Allocated cost
		Numerator	Denominator	% of Total
Materials	Number of employees	27	150	18.00%	$82,500.00	$14,850.00
Personnel	Number of employees	9	150	6.00%	$82,500.00	$4,950.00
Manufacturing	Number of employees	63	150	42.00%	$82,500.00	$34,650.00
Packaging	Number of employees	51	150	34.00%	$82,500.00	$28,050.00
Total				100.00%		$82,500.00

Utilities	Allocation Base	Percentage of allocation base			Cost to be allocated	Allocated cost
		Numerator	Denominator	% of Total
Materials	Square feet occupied	25000	100000	25.00%	$50,000.00	$12,500.00
Personnel	Square feet occupied	5000	100000	5.00%	$50,000.00	$2,500.00
Manufacturing	Square feet occupied	55000	100000	55.00%	$50,000.00	$27,500.00
Packaging	Square feet occupied	15000	100000	15.00%	$50,000.00	$7,500.00
Total				100.00%		$50,000.00

Insurance	Allocation Base	Percentage of allocation base			Cost to be allocated	Allocated cost
		Numerator	Denominator	% of Total
Materials	Value of assets in use	6000	60000	10.00%	$22,500.00	$2,250.00
Personnel	Value of assets in use	1200	60000	2.00%	$22,500.00	$450.00
Manufacturing	Value of assets in use	37800	60000	63.00%	$22,500.00	$14,175.00
Packaging	Value of assets in use	15000	60000	25.00%	$22,500.00	$5,625.00
Total				100.00%		$22,500.00

Solution 2:

Summary Report
	Supervision	Utilities	Insurance	Total
Materials	$14,850.00	$12,500.00	$2,250.00	$29,600.00
Personnel	$4,950.00	$2,500.00	$450.00	$7,900.00
Manufacturing	$34,650.00	$27,500.00	$14,175.00	$76,325.00
Packaging	$28,050.00	$7,500.00	$5,625.00	$41,175.00
Total	$82,500.00	$50,000.00	$22,500.00	$155,000.00