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 $ 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.)

Homework Answers

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
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