Caro Manufacturing has two production departments, Machining and Assembly, and t
ID: 2511339 • 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: Proportion of Services Used b Machining Department Machining Assembly Malntenance Cafeterlä Direct Costs Malntenance Cafeterla Assembly $100,000 66,400 41,200 33,000 0.5 0.2 0.3 0.2 0.2 0.6 value Required information 5.00 points Required Compute the allocation of service department costs to producing departments using the direct method. (Do not round intermediate calculations.) Total Costs Machining AssemblyExplanation / Answer
Steps of allocation are as below:
1)Ratios of allocation should be calculated first.
Service department
Aggregate
Production department
Mac
Asse
Main
0.5 + 0.3 = 0.8
0.5/0.8 = 5/8
0.3/0.8 = 3/8
Cafe
0.2 + 0.2 = 0.4
0.2/0.4 = 2/4 = ½
0.2/0.4 = 2/4 = ½
2) Then the service departments’ costs should be multiplied by above factors to get the allocated cost of service department.
Department
Mac
Asse
Main
Café
Allocation of Main
41,200 × (5/8) = 25,750
41,200 × (3/8) = 15,450
(41,200)
Allocation of Cafe
33,000 × (1/2) = 16,500
33,000 × (1/2) = 16,500
(33,000)
Total
42,250
31,950
0
0
Answer: Mac (total cost) = $42,250
Asse (total cost) = $31,950
Service department
Aggregate
Production department
Mac
Asse
Main
0.5 + 0.3 = 0.8
0.5/0.8 = 5/8
0.3/0.8 = 3/8
Cafe
0.2 + 0.2 = 0.4
0.2/0.4 = 2/4 = ½
0.2/0.4 = 2/4 = ½