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 step method, starting with the Maintenance Department. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

Maintenance Personnel Printing Developing Machine-hours — 1,100 1,100 3,300 Labor-hours 600 — 600 2,400 Department direct costs $ 5,600 $ 15,600 $ 17,200 $ 13,700

Explanation / Answer

Maintenance Personnel Printing Developing Service department costs $5,600 $15,600 Maintenance ($5,600) $5600 x 11/55 = $1120 $5600 x 11/55 = $1120 $5600 x 33/55 = $3360 Personnel ($16,720) $16,720 x 6/30 = $3,344 $16,720 x 24/30 = $13,376 Total costs allocated 0 0 $4,464 $16,736

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