Caro Manufacturing has two production departments, Machining and Assembly, and t
ID: 2519617 • 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 $ 140,000 Assembly 72,000 Maintenance 52,000 — 0.3 0.5 0.2 Cafeteria 33,000 0.7 — 0.2 0.1
Explanation / Answer
a) Allocation of service department cost :
b) Allocation of service department cost :
Cafeteria Maintenance Machining Assembly Department cost 33000 52000 140000 72000 Allocation of maintenance department cost 15600 -52000 26000 10400 Allocation of cafeterial cost -48600 - 32400 16200 Total cost - - 198400 98600