Question

1. 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 $150,000 and Maintenance has costs of $295,000 before any allocations. What amount of Maintenance total cost is allocated to the Packaging Department? (round to closest whole dollar) Employees are: Cafeteria Services 4 Maintenance 3 Assembly Department 7 Packaging Department 10

2. On January 2, 2018, Baltimore Company purchased 9,000 shares of the stock of Towson Company at $12 per share. Baltimore did NOT obtain significant influence as the purchase represents a 5% ownership stake in Towson Company. On August 1, 2018, Towson Company paid cash dividends of $17,000. Baltimore Company intended this investment to a long-term investment. On December 31, 2018, Towson Company reported $60,000 of net income for FY 2018. Additionally, the current market price for Towson Company's stock increased to $19 per share at the end of the year. Use this information to determine, how much Baltimore Company should report for its investment in Towson Company on December 31, 2018. (Round to the nearest dollar.)

Answer 1

1.

	Maintenance	Cafeteria	Assembly	Packaging
Employees	3	4	7	10
Direct cost	295,000	150,000
Allocate cafeteria cost in 3:7:10	22,500	-150,000	52,500	75,000
Subtotal	317,500	0	52,500	75,000
Allocate maintenance cost in 7:10	-317,500		130,735	186,765
Total	0	0	183,235	261,765

Amount of Maintenance total cost allocated to the Packaging Department = $186,765

2.

Investment [9000 x 12]	108,000
Add: Income received [60,000 x 5%]	3,000
Less: Dividend received [17,000 x 5%]	(850)
Increase in share price [(19 - 12) x 9000]	63,000
Investment value	173,150