In: Accounting
Support department cost allocation—direct method
Becker Tabletops has two support departments (Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows:
Support Department | Cost Driver | |
Janitorial Department | Square footage to be serviced | |
Cafeteria Department | Number of employees |
Janitorial Department |
Cafeteria Department |
Cutting Department |
Assembly Department |
|
Department costs | $320,000 | $190,000 | $1,520,000 | $690,000 |
Square feet | 46 | 5,000 | 1,200 | 4,800 |
Number of employees | 12 | 3 | 24 | 6 |
Allocate the support department costs to the production departments using the direct method.
Answer | |||||
Allocate the support department costs to the production departments using the direct method: | |||||
Support | Departments | Production | Departments | ||
Particulars | Janitorial department | Cafeteria department | Cutting department | Assembly department | Total |
Department Costs before allocation | $ 3,20,000 | $ 1,90,000 | $15,20,000 | $ 6,90,000 | $27,20,000 |
Allocation: | |||||
Janitorial department (1200:4800) | $ -3,20,000 | - | $ 64,000 | $ 2,56,000 | $ 3,20,000 |
Cafeteria department (24:6) | $ -1,90,000 | $ 1,52,000 | $ 38,000 | $ 1,90,000 | |
Total cost after Allocation | - | - | $17,36,000 | $ 9,84,000 | $27,20,000 |