4) Allocating Service Department Costs

Luck Food Baking makes desserts for local customers. Luck has 2 production departments (Mixing and Baking) and 2 service departments (Maintenance and cleaning.

The following data is available for Luck:

Mixing: 1,400 square feet of floor space, 40 employees

Baking: 600 square feet of floor space, 30 employees

Maintenance costs incurred: $49,000

Cleaning costs incurred: $23,000

a) Assume that maintenance costs are allocated based on the number of employees. How much maintenance costs should be allocated to the Baking Department?

b) Assume that cleaning cost are allocated based on square feet of floor space. How much cleaning costs should be allocated to the baking department?

c) If you are the manager of the Mixing department and want to minimize costs allocated to your department, would you prefer the costs be allocated base on the number of employees or square feet of floor space?