and two the five departments are presented below Service Janitorial Maintenance

Question

and two the five departments are presented below Service Janitorial Maintenance Costs $126,000 $81,800 $52,000 $298,100$512,600 $1,070,500 1,290 11,400 2,00036,00048,000 40 260 500 Square metres of space 400 1,600 1,400 2,000 6,000 occupied The company allocates service department costs by the step-down method in the following order Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine- hours). Assuming that the company uses the direct method rather than the step-down method to allocate service department costs, how much overhead cost would be assigned to each operating department? (Negative amounts should be indicated by a minus sign.) Operating Departments Administrative Janitorial Equipment Finishing Prep Total nte ntal costs before allocations

Explanation / Answer

Service Departments Operating Departments Administrative Janitorial Equipment Maintenance Prep Finishing Total Costs before allocation 126000 81800 52000 298100 512600 1070500 Allocation: Administrative -126000 70000 56000 Janitorial -81800 20450 61350 Equipment Maintenance -52000 13000 39000 Total cost after allocations 0 0 0 401550 668950 1070500 Workings: Administrative: Prep 126000/(500+400)*500 = 70000 Finishing 126000/(500+400)*400 = 56000 Janitorial: Prep 81800/(2000+6000)*2000 = 20450 Finishing 81800/(2000+6000)*6000 = 61350 Equipment Maintenance: Prep 52000/(12000+36000)*12000 = 13000 Finishing 52000/(12000+36000)*36000 = 39000

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