Allocate Service Department CostsDirect and Step Methods: Parker Manufacturing Company has three service departments (general factory administration,
Question:
Allocate Service Department Costs—Direct and Step Methods: Parker Manufacturing Company has three service departments (general factory administration, factory maintenance, and factory cafeteria), and two production departments (fabrication and assembly). A summary of costs and other data for each department prior to allocation of service department costs for the year ended June 30 are as follows:
The costs of the service departments are allocated on the following bases: general factory administration department, direct labor-hours; factory maintenance depart- ment, square footage occupied: and factory cafeteria, number of employees.
Required:
Round all final calculations to the nearest dollar.
a. Assume that Parker elects to distribute service department costs directly to production departments using the direct method. The amount of factory mainte- nance department costs allocated to the fabrication department would be:
1. $0.
2. $111,760.
3. $106,091.
4. $91,440.
5. None of the above.
b. Assume the same method of allocation as in {a). The amount of general factory administration department costs allocated to the assembly department would be:
1. $0.
2. $63,636.
3. $70,000.
4. $90,000.
5. None of the above.
c. Assume that Parker elects to distribute service department costs to other departments using the step method (starting with factory cafeteria, then factory maintenance), the amount of factory cafeteria department costs allocated to the factory maintenance department would be:
1. $0.
2. $96,000.
3. $3,840.
4. $6,124.
5. None of the above.
d. Assume the same method of allocation as in (c). The amount of factory mainte- nance department costs allocated to the factory cafeteria would be:
1. $0.
2. $5.787.
3. $5.856.
4. $148.910.
5. None of the above.
Step by Step Answer:
