Woh Che Co. has four departments: materials, personnel, manufacturing, and packa

Question

Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Departmental data for the company’s recent reporting period follow.

1. Use this information to allocate each of the three indirect expenses across the four departments.
2. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.
  

Indirect Expense Cost Allocation Base Supervision $ 84,500 Number of employees Utilities 70,000 Square feet occupied Insurance 32,500 Value of assets in use Total $ 187,000

Explanation / Answer

Answer to Part 1 Super Vision Expenses Allocation Base Percentage of Allocation Indirect Cost Allocated Cost Department Number of Employees Numerator Denominator % of Total (Indirect Cost*% of Total) Materials 40 40 200 20% 84500 16900 Personnel 10 10 200 5% 84500 4225 Manufacturing 84 84 200 42% 84500 35490 Packaging 66 66 200 33% 84500 27885 Total 200 84500 Utilities Allocation Base Percentage of Allocation Indirect Cost Allocated Cost Department Square Feet Occupied Numerator Denominator % of Total Materials 39000 39000 195000 20% 70000 14000 Personnel 19500 19500 195000 10% 70000 7000 Manufacturing 107250 107250 195000 55% 70000 38500 Packaging 29250 29250 195000 15% 70000 10500 Total 195000 70000 Insurance Allocation Base Percentage of Allocation Indirect Cost Allocated Cost Department Asset Value Numerator Denominator % of Total Materials 12000 12000 80000 15% 32500 4875 Personnel 1600 1600 80000 2% 32500 650 Manufacturing 47200 47200 80000 59% 32500 19175 Packaging 19200 19200 80000 24% 32500 7800 Total 80000 32500 Answer to Part 2: Super Vision Expenses Utilities Insurance Total Materials 16900 14000 4875 35775 Personnel 4225 7000 650 11875 Manufacturing 35490 38500 19175 93165 Packaging 27885 10500 7800 46185 84500 70000 32500 187000

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