Exercise 9-5 Departmental expense allocations LO P2 Woh Che Co. has four departm

Question

Exercise 9-5 Departmental expense allocations LO P2 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. Allocation Base Indirect Expense Supervision Utilities Insurance Cost 82,000 Number of employees 59,000 Square feet occupied 27,000 Value of assets in use Total $168,00e Departmental data for the company's recent reporting period follow Employees Asset Values Department Materials Personnel Manufacturing Packaging Total Square Feet 66,500 9,500 95,000 19,000 190,000 $10, 350 4,140 38,640 15,870 $69,000 58 70 64 200 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

Explanation / Answer

Answer

Percent of Allocation Base

Supervision expenses

Allocation Base

Numerator

Denomintator

% of total

Costs to be allocated

Allocated Cost

Departments:

Materials

Number of employees

58

200

29%

$               82,000.00

$       23,780.00

Personnel

Number of employees

8

200

4%

$               82,000.00

$         3,280.00

Manufacturing

Number of employees

70

200

35%

$               82,000.00

$       28,700.00

Packaging

Number of employees

64

200

32%

$               82,000.00

$       26,240.00

Totals

200

200

100%

$               82,000.00

$       82,000.00

Percent of Allocation Base

Utilities

Allocation Base

Numerator

Denomintator

% of total

Costs to be allocated

Allocated Cost

Departments:

Materials

SquareFeet

66500

190000

35%

$               59,000.00

$       20,650.00

Personnel

SquareFeet

9500

190000

5%

$               59,000.00

$         2,950.00

Manufacturing

SquareFeet

95000

190000

50%

$               59,000.00

$       29,500.00

Packaging

SquareFeet

19000

190000

10%

$               59,000.00

$         5,900.00

Totals

190000

190000

100%

$               59,000.00

$       59,000.00

Percent of Allocation Base

Insurance

Allocation Base

Numerator

Denomintator

% of total

Costs to be allocated

Allocated Cost

Departments:

Materials

Asset Values

10350

69000

15%

$               27,000.00

$         4,050.00

Personnel

Asset Values

4140

69000

6%

$               27,000.00

$         1,620.00

Manufacturing

Asset Values

38640

69000

56%

$               27,000.00

$       15,120.00

Packaging

Asset Values

15870

69000

23%

$               27,000.00

$         6,210.00

Totals

69000

69000

100%

$               27,000.00

$       27,000.00

Supervision

Utilities

Insurance

Total

Materials

$              23,780.00

$        20,650.00

$            4,050.00

$               48,480.00

Personnel

$                  3,280.00

$           2,950.00

$            1,620.00

$                 7,850.00

Manufacturing

$               28,700.00

$        29,500.00

$          15,120.00

$               73,320.00

Packaging

$               26,240.00

$           5,900.00

$            6,210.00

$               38,350.00

Totals

$               82,000.00

$        59,000.00

$          27,000.00

$           1,68,000.00

Percent of Allocation Base

Supervision expenses

Allocation Base

Numerator

Denomintator

% of total

Costs to be allocated

Allocated Cost

Departments:

Materials

Number of employees

58

200

29%

$               82,000.00

$       23,780.00

Personnel

Number of employees

8

200

4%

$               82,000.00

$         3,280.00

Manufacturing

Number of employees

70

200

35%

$               82,000.00

$       28,700.00

Packaging

Number of employees

64

200

32%

$               82,000.00

$       26,240.00

Totals

200

200

100%

$               82,000.00

$       82,000.00

Percent of Allocation Base

Utilities

Allocation Base

Numerator

Denomintator

% of total

Costs to be allocated

Allocated Cost

Departments:

Materials

SquareFeet

66500

190000

35%

$               59,000.00

$       20,650.00

Personnel

SquareFeet

9500

190000

5%

$               59,000.00

$         2,950.00

Manufacturing

SquareFeet

95000

190000

50%

$               59,000.00

$       29,500.00

Packaging

SquareFeet

19000

190000

10%

$               59,000.00

$         5,900.00

Totals

190000

190000

100%

$               59,000.00

$       59,000.00

Percent of Allocation Base

Insurance

Allocation Base

Numerator

Denomintator

% of total

Costs to be allocated

Allocated Cost

Departments:

Materials

Asset Values

10350

69000

15%

$               27,000.00

$         4,050.00

Personnel

Asset Values

4140

69000

6%

$               27,000.00

$         1,620.00

Manufacturing

Asset Values

38640

69000

56%

$               27,000.00

$       15,120.00

Packaging

Asset Values

15870

69000

23%

$               27,000.00

$         6,210.00

Totals

69000

69000

100%

$               27,000.00

$       27,000.00

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