Arbon Company has three service departments and two operating departments. Selec

Question

Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented below: Service Departments Operating Departments Equipment Maintenance $36,000 Janitorial $67,800 60 1,200 Administrative Total Finishing $256,100 $498,600 $942,500 Prep Costs Number of employees Square metres of space $84,000 80 1,280 7,000 11,500 0,000 30,000 40,000 600 2,000 240 300 300 1,000 occupied Machine-hours The company allocates service department costs by the step-down method in the following order: Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine- hours) Required. Assuming that the company uses the direct method rather than the step-down method to allocate service department costs, how much overhead cost would be assigned to each operating department? (Negative amounts should be indicated by a minus sign.) Service Departments Operating Departments Equipment Maintenance Administrative Janitorial Finishing Total re Departmental costs before allocations Allocations Administrative Janitorial Equipment maintenance Total costs after allocation

Explanation / Answer

Service Departments operating deptt Adm janitorieal Equi maint prep finishing total Departmental costs before allocations 84,000 67,800 36,000 256,100 498,600 942,500 allocations: Administration costs (600;300) -84,000 56000 28000 0 Janitorial (2:7) -67,800 15067 52733 0 Equipment maintenance (1:3) -36,000 9000 27000 0 total cost after allocation 0 0 0 336,167 606,333 942,500

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