Caro Manufacturing has two production departments, Machining and Assembly, and t
ID: 2557249 • 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 by Department Direct Costs Maintenance Cafeteria Machining Assembly Machining $ 98,000 Assembly 74,400 Maintenance 46,000 — 0.2 0.6 0.2 Cafeteria 37,000 0.6 — 0.1 0.3 Assume that both Machining and Assembly work on just two jobs during the month of August: CM-22 and CM-23. Costs are allocated to jobs based on machine-hours in Machining and labor-hours in Assembly. The number of labor- and machine-hours worked in each department are as follows: Machining Assembly Job CM-22: Machine-hours 230 60 Labor-hours 20 20 Job CM-23: Machine-hours 20 40 Labor-hours 30 100 Required: How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23? (Round "Department rate" to 2 decimal places.) Required: How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23? (Round "Department rate" to 2 decimal places.) Required: How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23? (Round "Department rate" to 2 decimal places.)
Explanation / Answer
ALLOCATION OF SERVICE DEPTT. COST Maintenance Cafeteria Machning Assembly Direct Cost 98000 74400 46000 37000 Add: Cost of Maintenance Deptt -98000 73500 24500 ($ 98000 in 0.6:0.2) Add: Cost of Cafeteria -74400 18600 55800 ($ 74400 in 0.1:0.3) TOTAL OH COST 0 0 138100 117300 Divide: Number of MH of machining department 250 Divide: Number of DLH of Assembly department 120 OH cost per hour 552.4 977.5 Cost Allocated to Jobs: Job CM-22 Job CM-23 MH used of machining deptt 230 20 DLH used of Assembly deptt. 20 100 Oh Assigned Machining @552.40 127052 11048 Assembly @ 977.50 19550 97750 Total OH cost 146602 108798