1. Under the direct method, what percentage of PM should be allocated to Machini

Question

1. Under the direct method, what percentage of PM should be allocated to Machining?

2.- Under the direct method, how much of the total MOH cost attributable to PM should be allocated to Machining? Do NOT use the rounded numbers from your answer to Question 1 when calculating this amount. Use the actual decimals and then round the answer to two decimals.

3. - Under the direct method, what percentage of IT should be allocated to Machining?

4.- Under the direct method, how much of the total MOH cost attributable to IT should be allocated to Assembly?

5. - Under the step method, what percentage of PM should be allocated to IT?

6.- Under the step method, how much of the total MOH cost attributable to PM should be allocated to Assembly?

7. - Under the step method, what percentage of IT should be allocated to PM?

8. - Under the step method, how much of the total MOH cost attributable to IT should be allocated to Machining?

Background information for all problems Chekley Manufacturing has two production departments (Machining and Assembly) They have two service departments that provide services to each other and to production (Plant Maintenance and IT) Chekley believes Plant Maintenance (PM) should be allocated based on square footage and IT should be allocated based on computer hours. Chekley allocates Plant Maintenance first when allocating using the step method. You have the following additional information:

Explanation / Answer

Solution:

1. Percentage of PM allocated to machining under direct method = $333,333.33/$500,000 = 66.6666%

2. MOH of PM allocated to machining under direct method = $333,333.33

3. Percentage of IT allocated to machining under direct method = $337,500/$450,000 = 75%

4. MOH of IT allocated to Assembly under direct method = $112,500

5. Under the step method, percentage of PM should be allocated to IT = $50,000 / $500,000 = 10%

6. Under the step method, total MOH cost attributable to PM should be allocated to Assembly = $150,000

7. Under the step method, percentage of IT should be allocated to PM = 0%

8. Under the step method, the total MOH cost attributable to IT should be allocated to Machining = $375,000

From Service Department Cost Allocation - Direct Method Service Department Operating Departments Plant Maintenance Information System Machining Assembly Direct charges of department $500,000.00 $450,000.00 $2,000,000.00 $3,150,000.00 Plant Maintenance (12:6) -$500,000.00 $333,333.33 $166,666.67 Information System (24:8) -$450,000.00 $337,500.00 $112,500.00 Total $0.00 $0.00 $2,670,833.33 $3,429,166.67

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