Question:
Allocating Service Department Costs First to Production Departments and Then to Jobs
Refer to the facts in Exercise 11-22. Assume that both Building A and Building B work on just two jobs during the month of June: RW-12 and RW-13. Costs are allocated to jobs based on labor-hours in Building A and machine-hours in Building B. The number of labor- and machine-hours worked in each department are as follows:
|
|
|
Building A
|
Building B
|
|
Job RW-12:
|
Labor-hours
|
160
|
20
|
|
|
Machine-hours
|
20
|
40
|
|
Job RW-13
|
Labor-hours
|
20
|
20
|
|
|
Machine-hours
|
20
|
180
|
Required
How much of the service department costs allocated to Building A and Building B in the direct method should be allocated to Job RW-12? How much should be allocated to Job RW-13?
Cost Allocation: Direct Method
Warren Ltd. has two production departments, Building A and Building B, 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 June follow:
|
Proportion of Services Used by
|
|
Department
|
Direct Costs
|
Maintenance
|
Cafeteria
|
Building A
|
Building B
|
|
|
|
|
|
|
|
|
Building A
|
$990,000
|
|
|
|
|
|
Building B
|
644,000
|
|
|
|
|
|
Maintenance
|
400,000
|
-
|
0.2
|
0.5
|
0.3
|
|
Cafeteria
|
320,000
|
0.8
|
-
|
0.1
|
0.1
|
Required
Compute the allocation of service department costs to producing departments using the direct method.