The Hsu Manufacturing Company has two service departments: Maintenance and Accou

Question

The Hsu Manufacturing Company has two service departments: Maintenance and Accounting The Maintenance Department's costs of $641,850 are allocated on the basis of machine hours. The Accounting Department's costs of $212,400 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $390,000 and $590,000, respectively. Maint 495 2 65 2 3,600 8 290 4 Machine hours Number of employees What is the cost of the Accounting Department's cost allocated to Department A using the step method and assuming the Maintenance Department's costs are allocated first? O $141,600o. O $148,379 O$127024 O $148,633.

Explanation / Answer

Cost Allocation Base Maintenance deptt 641850 Machine Hrs Accounting deptt 212400 No. of Employees A B Direct Departmental Cost $ 390,000.00 $ 590,000.00 Machine Hrs No.of Employess Maintenance deptt 495 2 Accounting deptt 65 2 A 3600 8 B 290 4 TOTAL 4450 hrs 16 Maintenance Cost allocated to Accounting Department ;= Maintenance Deptt cost/Total Machine hrs*Machine hrs of Acccounting Deptt = $641850/(65+3600+290)*65 = $641850/3955 hrs*65 10548.73578 Total Cost of Accounting Deptt = Cost incurred by Accounting Deptt. + Cost apportioned from MintenanceDeptt. = $212400+10548.74 $ 222,948.74 Accounting Cost allocated to deptt. A = Cost of Acc. Deptt/Total No. of Employees *Employees in Deptt = 222948.74/(8+4)*8employee $                                   148,632.49 Answer is D)$148633(approx)

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