University Printers has two service departments (Maintenance and Personnel) and

Question

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.) (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

Explanation / Answer

Solution-

Service Dept. Operating departments Maintenance Personnel Printing Developing Total    Machine-hours              637              637             3,626       4,900    Labor-hours                     210              300                990       1,500    Department direct costs                11,000         23,000         28,000           22,000     84,000 Allocation of Maintenance Costs - 637/4900 637/4900 3626/4900 Basis of Machine hours - 13% 13% 74% Allocation of Personnel costs 210/1500 - 300/1500 990/1500 Basis of labor hours 14% - 20% 66%

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