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Frederick Company has two service departments (Cafeteria Services & Maintenance). Frederick has two production departments (Assembly...

Frederick Company has two service departments (Cafeteria Services & Maintenance). Frederick has two production departments (Assembly Department & Packaging Department.) Frederick uses a step allocation method where Cafeteria Services is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Cafeteria Services has costs of $170,000 and Maintenance has costs of $220,000 before any allocations. What amount of Maintenance total cost is allocated to the Packaging Department? (round to closest whole dollar) Employees are: Cafeteria Services 6 Maintenance 3 Assembly Department 11 Packaging Department 9

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Answer #1

As per the details given in the question cafeteria cost is allocated to all department but maintenance cost is allocated to production department only on the basis of no. of employees.

Total Maintenance cost is $220,000 before allocation.

Total employees of in Production Department is 20 ( 11 Assembly + 9 Packaging )

Total maintenance cost per employee = $220,000 / 20

                                                        =$11,000

Total allocation of maintenance cost of packaging department ids $ 11,000 X 9 employees i.e. $99,000.

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