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	$	99,000
Assembly		64,400
Maintenance		40,000		—		0.2		0.5		0.3
Cafeteria		32,000		0.8		—		0.1		0.1

Exercise 11-27 (Static) Cost Allocation: Direct Method (LO 11-2)

Required:

Compute the allocation of service department costs to producing departments using the direct method. (Do not round intermediate calculations.)

	Total Costs
Machining
Assembly

Answer 1

Allocation of Service department cost
			Maintenance	Cafeteria	Machining	Assembly
Direct cost		40000	32000
Allocation of Maintenance cost	-40000		25000	15000
($ 40,000 in the ratio of 0.5: 0.3)
Allocation of Cafeteria cost		-32000	16000	16000
($ 32000 in ratio of 0.1:0.1)
Cost of Service deptt allocated	0	0	41000	31000
		Total cost
Machining	41000
Assembly		31000