Question

Williams manufactures a variety of iron products, made to customer specifications, in small batches. Willie Williams, owner, is concerned that he does not have an accurate understanding of the costs of production. You, a newly-minted MBA, have researched his business and identified various costs and cost drivers. Janitorial Welding HR Data Svcs Assembly Total Own costs $12,000 $90,000 $37,200 $32,400 $54,000 $225,600 Square feet 500 3,000 1,500 2,000 4,500 11,500 # employees 7 25 8 10 75 125 # transactions (thou) 30 100 180 600 140 1,050 Power usage 22 730 11 17 220 1,000 If the direct method is used, which of the following is true? The service departments (Janitorial, HR, and Data Services) are allocated to the two production departments (Welding and Assembly). Janitorial costs are allocated using square feet, HR using number of employees, and Data Services using number of transactions. You recall that there are several approaches to the allocation of service department costs, direct, step-down and reciprocal methods. The amount of Welding costs allocated to Assembly is $37,500 The amount of HR allocated to Janitorial is $2,604 The amount of Data Services costs allocated to Welding is $13,500 The amount of Janitorial costs allocated to Assembly is $4,909 None of the above

Answer 1

Solution:

From	Service Department Cost Allocation - Direct Method
	Service Department			Operating Departments
	Janitorial	HR	Data Services	Welding	Assembly
Direct charges of department	$12,000.00	$37,200.00	$32,400.00	$90,000.00	$54,000.00
Janitorial (30:45)	-$12,000.00			$4,800.00	$7,200.00
HR (25:75)		-$37,200.00		$9,300.00	$27,900.00
Data Services (100:140)			-$32,400.00	$13,500.00	$18,900.00
Total	$0.00	$0.00	$0.00	$117,600.00	$108,000.00

from above table, true statement is "The amount of Data Services costs allocated to Welding is $13,500"