Caro Manufacturing has two production departments, Machining and Assembly, and t
ID: 2342537 • Letter: C
Question
Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:
Use the step method to allocate the service costs, using the following:
a. The order of allocation starts with Maintenance.
Department Direct Costs Maintenance Cafeteria Machining Assembly Machining $125,000 Assembly $69,000 Maintenance $45,000 ---------------- 0.3 0.4 0.3 Cafeteria $42,000 0.7 ------------ 0.2 0.1
Explanation / Answer
a.
b.
From Maintenance Cafeteria Machining Assembly Service Department Costs $45,000 $42,000 Maintenance ($45,000) $13,500 ($45,000*0.3) $18,000 ($45,000*0.4) $13,500 ($45,000*0.3) Cafeteria $0 ($55,500) $37,000 ($55,500*0.2/0.3) $18,500 ($55,500*0.1/0.3) Total costs $0 $0 $55,000 $32,000