Departmental Cost Allocation Logan Products has two production departments-assem

Question

Departmental Cost Allocation Logan Products has two production departments-assembly and finishing. These are supported by two service departmentssourcing (purchasing and handling of raw materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments Total Labor Hours Used by Departments Sourcing Operations Assembly 40,000 60,000 Finishing 60,000 50,000 20,000 Sourcing Operations 10,000 The costs incurred in the plant are as follows Departments Departmental Costs Sourcing Operations Assembly Finishing $165,000 205,000 410,000 255,000 Total $1,035,000 Required Use 4 or more decimal places (eg, 33.3333%) in your calculations 1. What are the costs allocated to the two production departments using (a) the direct method

Explanation / Answer

Cost allocation under direct method :

Sourcing Operations Assembly Finishing Total Departmental costs 165000 205000 410000 255000 1035000 Allocation of sourcing department cost (165000) 66000 99000 Allocation of operations cost (205000) 111818 93182 Total - - 587818 447182 1035000

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