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		—			2,000			2,000			3,000
Labor-hours		900			—			900			2,100
Department direct costs	$	5,600		$	15,600		$	17,300		$	13,800

Required:

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.)

Answer 1

	Maintenance ($)	Personnel ($)	Printing ($)	Developing ($)
Service Department Costs	5,600	15,600	-	-
Maintenance Costs Allocation	(5,600)	1,600	1,600	2,400
Personnel Costs Allocation	-	(17,200)	5,160	12,040
Total Costs Allocated	-	-	6,760	14,440

Maintenance Costs was allocated in the ratio of Machine Hours = 2000:2000:3000 or 2:2:3 (Personnel : Printing : Developing)

Personnel Costs was allocated in the ratio of Labor Hours = 900:2100 or 3:7 (Printing : Developing)