Question

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:

	Maintenance			Personnel			Printing			Developing
Machine-hours		—			1,000			1,000			3,000
Labor-hours		500			—			500			2,000
Department direct costs	$	5,000		$	12,000		$	15,000		$	10,000
REQUIRED: BELOW Allocate the service department costs using the step method, starting with the Maintenance Department. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

	Maintenance	Personnel	Printing	Developing
Service department costs	$5,000	$12,000
Maintenance	(5,000)
Personnel
Total costs allocated	$0	$12,000	$0	$0

Answer 1

solution :Allocation of service department cost using step method :

	Maintenance	Personnel	Printing	Developing
Service Department Cost	5000	12000
Maintenance alloacation	-5000	893	893	3214
Personnel allocation		-12893	2579	10314
Total cost allocated	0	0	3472	13528

working :

maintenece alloacation :

personnel [1000 / (1000 + 1000 + 3600) ] x 5000 = 893(approx)

printing [1000 / (1000 + 1000 + 3600) ] x 5000 = 893(approx)

Developing [ 3600/ (1000 + 1000 + 3600)] x 5000 = 3214

Personnel Allocation :

printing [500/(500 +2000)] x 12893 =2579

Developing [ 2000 /(500 +2000) ] x 12893 =10314

learning points : step method alloacate service costs to the opearting departments and other available service department in sequence manner.

(if you have any doubt related to this just ask me ..all the best champ)