Caro Manufacturing has two production departments, Machining and Assembly, and t
ID: 2400503 • 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:
Required:
Use the step method to allocate the service costs, using the following:
a. The order of allocation starts with Maintenance. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)
b. The allocations are made in the reverse order (starting with Cafeteria). (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)
Proportion of Services Used by Department Direct Costs Maintenance Cafeteria Machining Assembly Machining $ 110,000 Assembly 76,000 Maintenance 49,000 — 0.2 0.6 0.2 Cafeteria 37,000 0.8 — 0.1 0.1Explanation / Answer
a) Allocation of cost :
b) Allocation of cost :
Maintenance Cafeteria Machining Assembly Direct costs 49000 37000 110000 76000 Allocation of maintenance cost -49000 9800 29400 9800 Allocation of cafeteria cost -46800 23400 23400 Total cost 0 0 162800 109200