Question

Exercise 11-31 (Algo) Cost Allocation: Step Method (LO 11-3)

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:

	Maintenance			Personnel			Printing			Developing
Machine-hours		—			1,100			1,100			3,300
Labor-hours		550			—			550			2,200
Department direct costs	$	5,800		$	15,800		$	17,100		$	14,500

Required:

Allocate the service department costs using the step method, starting with the Maintenance Department. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

	Maintenance	Personnel	Printing	Developing
Service Department Costs
Maintenance
Personnel
TOTAL Costs Allocated	$	$	$	$

Answer 1

• Requirement

	Maintenance	Personnel	Printing	Developing
Service Department Costs	$5,800	$15,800	$17,100	$14,500
Maintenance Allocation (1100+1100+3300 = 5500)	($5,800)	$1,160	$1,160	$3,480
Personnel Allocation (550 + 2200 = 2750)		($16,960)	$3,392	$13,568
Total Cost allocated	$0	$0	$21,652	$31,548

--Working

	Maintenance	Personnel	Printing	Developing
Service Department Costs	5800	15800	17100	14500
Maintenance Allocation (1100+1100+3300 = 5500)	-5800	=5800*1100/5500	=5800*1100/5500	=5800*3300/5500
Personnel Allocation (550 + 2200 = 2750)		=-15800-1160	=16960*550/2750	=16960*2200/2750