Ming, Inc., has two service departments (maintenance and general factory administration) and two production departments (cutting and

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Ming, Inc., has two service departments (maintenance and general factory administration) and two production departments (cutting and assembly). Management has decided to allocate maintenance costs on the basis of the size of the area in each department and general factory administration costs on the basis of the number of labor hours worked by the employees in each of their respective departments.

The following data appear in the company records for the current period:

General Factory Administration Maintenance Cutting Assembly Area occupied (square feet)............ccceecee 1,000 — 1,000 3,000 Zab OR Mouse. el es IS ee — 100 100 400 Direct labor costs (operating GE WAGIMENISIOMIY) Mk srieei oth decteMtweccosteen — — $3,000 $8,000 Service department direct Costs ........ccceeee $20,000 $48,000 — —

Required Use the direct method to allocate the service department costs to the production departments

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Cost Management Strategies For Business Decisions

ISBN: 12

4th Edition

Authors: Ronald Hilton, Michael Maher, Frank Selto

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