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. The following data appear in the company records for the current period: Required: Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.)

Explanation / Answer

Reciprocal method means to reallocate the two service department (maintenance and personnel) costs until the service departments reach a zero balance.
a. Machine Hour percentage : Allocation of maintenance costs = Total Machine hours of Personnel, Printing and Developing = 516 + 516 + 3,268

= 4,300

Calculation of Percentages :

i. Personnel = 516/ 4300= 12 %

ii. Printing = 516/ 4300 = 12 %

iii. Developing = 3268/ 4300 = 76 %

b. Labor Hour percentage : Allocation of Personnel Costs

Total Labor Hours = Total Labor Hours of Maintenance + Printing + Development

= 255 + 195 + 1,050

= 1,500 Hours

Calculation of Percentages :

i. Maintenance = 255/1,500= 17%

ii. Printing = 195/1,500= 13%

iii. Developing = 1,050/1,500 = 70 %

( Maintenance Costs have been divided in the ratio 12 :12:76 )

( Personnel costs have been divided in the ratio 17:13:70 )

Maintenance Personnel Printing Developing Costs before allocation $11,000 $22,000 $34,000 $21,000 Allocating Maintenance Costs 11,000 1320 1320 8360 Costs after allocating Maintenance Costs $0 $20,680 $32,680 $12,640 Allocating Personnel Costs 3515.60 -20680.00 2688.40 14476.00 Allocating Maintenance Costs -3515.6000 421.8720 421.8720 2671.8560 Allocating Personnel Costs 71.7182 -421.8720 54.8434 295.3104 Allocating Maintenance Costs -71.7182 8.6062 8.6062 54.5059 Allocating Personnel Costs 1.4637 -8.6100 1.1193 6.0270 Allocating Maintenance Costs -1.4600 0.1752 0.1752 1.0220 Allocating Personnel Costs 0.0306 -0.1800 0.0234 0.1260 Allocating Maintenance Costs -0.0306 0.0037 0.0037 0.0233 Total Final Costs 0.0000 0.0000 $35,855.04 $30,144.87

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.