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

$

104,000

Assembly

74,400

Maintenance

46,000

—

0.2

0.5

0.3

Cafeteria

37,000

0.6

—

0.2

0.2

Assume that both Machining and Assembly work on just two jobs during the month of August: CM-22 and CM-23. Costs are allocated to jobs based on machine-hours in Machining and labor-hours in Assembly. The number of labor- and machine-hours worked in each department are as follows:

		Machining		Assembly
Job CM-22:	Machine-hours	150		60
	Labor-hours	40		20
Job CM-23:	Machine-hours	50		20
	Labor-hours	30		110

Required:
How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23? (Round "Department rate" to 2 decimal places.)

Answer 1

	Machining	Assembly
Maintenance:
46000/(0.5+0.3)*0.5	28750
46000/(0.5+0.3)*0.3		17250
Cafeteria:
37000/(0.2+0.2)*0.2	18500
37000/(0.2+0.2)*0.2		18500
Total	47250	35750
	Machining	Assembly
Allocation bases:
Job CM­22: Machine­hours	150
Labor­hours		20
Job CM­23: Machine­hours	50
Labor­hours		110
Total allocation base	200	130
Department rates:
Machining : 47250/200	236.25	per machine­hour
Assembly : 35750/130	275.00	per labor­hour
Costs assigned to jobs:
Job CM­22
Machining	35437.5	=150*236.25
Assembly	5500	=20*275
	40937.5
Job CM­23
Machining	11812.5	=50*236.25
Assembly	30250	=110*275
	42062.5
	Job CM­22	Job CM­23
Machining	35437.50	11812.50
Assembly	5500.00	30250.00
If rounded off:
	Job CM­22	Job CM­23
Machining	35438	11813
Assembly	5500	30250