Industries has two production departments (Finishing and Painting) and three service departments (Maintenance, Computer Support, and Personnel). Service department costs are allocated to production departments using the direct method. Maintenance allocates costs totaling \($3,000,000\) based on the square footage of space occupied by each production department. Computer Support allocates costs totaling \($4,000,000\) based on hours of computer support used by each production department. Personnel allocates costs totaling \($2,500,000\) based on number of employees in each production department. Information for each production department follows.

Required

a. Calculate the service department costs allocated to each production department.

b. Why do companies allocate the costs of service departments to their production Finishing: 700,000 departments?

Transcribed Image Text:

Square Computer Number Production Feet Support of Department Occupied Hours Employees Finishing 10,000 21,000 70 Painting 30,000 39,000 180 Total 40,000 60,000 250