Question

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria....

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

Required:

Use the step method to allocate the service costs, using the following:

a. The order of allocation starts with Maintenance.

b. The allocations are made in the reverse order (starting with Cafeteria).

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