Smother's Wood Company is in the process of selecting cost drivers that could be used as the basis for allocating various service department costs to its three production divisions: Cutting, Milling and Finishing.
Select the most appropriate allocation base for each type of service department cost. Select from among the four allocation bases in the following list. In recording your answer, use the abbreviations provided in the list. Some allocation bases will be used for more than one answer.
Possible Choices of Allocation Bases:
Number of Employees
Units of Production Capacity
Square Footage Occupied
Budgeted Production Department Overhead
Type of Service Department Cost to be Allocated to the Producing Divisions
a. Cost of operating a uniform cleaner that services all employees
b. Total payroll department costs
c. Fixed costs necessary to maintain upkeep of the equipment
d. Cost of insurance services
e. Variable cost of the Utilities Department
f. Janitorial Costs.