Question

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 ---- 1,800 1,800 5,400

Labor-hours 650 — 650 2,600

Department direct costs $ 4,000 $ 14,000 $ 15,900 $ 12,600

Required: Allocate the service department costs using the step method, starting with the Maintenance Department

Answer 1

Allocation of Service department cost:

	Maintenance	Personnel	Printing	Developing	Total
Maintenance (based on machine hours)	-	800	800	2,400	4,000
Personnel (based on labour hours)	2,467	-	2,467	9,866	14,800
Step2: Maintenance Department	-	493	493	1,481	2,467
Personnel	82	-	82	329	493
Step3: Maintenance		16	16	50	82
Personnel	3	-	3	-10	16
Step4: Maintenance	-	0.6	0.6	1.8	3
Personnel	0.1	-	0.1	0.4	0.6