The RAH Manufacturing Company has two service departments: Maintenance and Accou
ID: 2444446 • Letter: T
Question
The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $301,000 are allocated on the basis of machine hours. The Accounting Department's costs of $121,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $301,000 and $501,000, respectively.
What is the Maintenance Department's cost allocated to Department B using the step method and assuming the Maintenance Department's costs are allocated first?
Maint Acctg A B Machine hours 482 21 2,320 210 Number of employees 3 3 9 5Explanation / Answer
Maintenance
Accounting
Dept
Dept
Dept A
Dept B
Total
Maintenance
Accounting
Dept
Dept
Dept A
Dept B
Total
a.
Maintaenance Dept Cost
300000
Machine hours:
Dept A
2300
Dept B
200
Total Hours
2500
Cost Allocation to Dept A
= 300000 * 2300/2500
= $276,000
b.
Accounting Dept Cost
120000
Employees
Dept A
8
Dept B
4
Total Employees
12
Cost allocation to Dept B
= 120000*4/12
= $40000
c.
Maintaenance Dept Cost
300000
Machine hours:
Accounting Dept
20
Dept A
2300
Dept B
200
Total Hours
2520
Cost Allocation to dept B
= 300000 * 200/2520
= $23,810
Costs Allocation under Direct Methode:Maintenance
Accounting
Dept
Dept
Dept A
Dept B
Total
Departments costs 300000 120000 300000 500000 1220000 Allocation: Maintenance Dept 23/25 & 2/25 -300000 276000 24000 Accounts Dept 8/12 & 4/12 -120000 80000 40000 Total Costs Allocation: 0 0 656000 564000 1220000Related Questions
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