Question

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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	$	94,000
Assembly		66,400
Maintenance		41,200		—		0.2		0.6		0.2
Cafeteria		33,000		0.8		—		0.1		0.1

Required:

Compute the allocation of service department costs to producing departments using the direct method. (Do not round intermediate calculations.)

Answer 1

Direct Method:	Machining	Assembly	Total
Allocation for maintenance costs (0.6/0.8 = 75%*$41,200); (0.2/0.8 = 25% * $41,200)	$30,900	$10,300	$41,200
Allocation for Cafereria costs (0.1/0.2 = 50%*$33,000); (0.1/0.2 = 50% * $33,000)	$16,500	$16,500	$33,000
	Maintenance	Cafeteria	Machining	Assembly
Departmental Costs	$41,200	$33,000	$94,000	$66,400
Allocation of Maintenance Costs	($41,200)		$30,900	$10,300
Allocation of Cafeteria Costs		($33,000)	$16,500	$16,500
Total Costs	$0	$0	$141,400	$93,200