Question

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	$	100,000
Assembly		70,000
Maintenance		48,000		—		0.2		0.5		0.3
Cafeteria		41,000		0.7		—		0.2		0.1

Required:

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

a. The order of allocation starts with Maintenance

Required A

From	Maintenance	Cafeteria	Machining	Assembly
Service department costs	?	?	?	?
Maintenance	?	?	?	?
Cafeteria	?	?	?	?
Total Costs

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

From	cafeteria	Maintenance	Machining	Assembly
Service department cost	?	?	?	?
Cafeteria	?	?	?	?
Maintenance	?	?	?	?
Total costs	?	?	?	?

Answer 1

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

a. The order of allocation starts with Maintenance

Required A

From	Maintenance	Cafeteria	Machining	Assembly
Service department costs	48000	41000
Maintenance	-48000	9600	24000	14400
Cafeteria		-50600	33733	16867
Total Costs	0	0	57733	29267

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

From	cafeteria	Maintenance	Machining	Assembly
Service department cost	41000	48000
Cafeteria	-41000	28700	8200	4100
Maintenance		-76700	47937.50	28762.50
Total costs	0	0	56137.50	32862.50