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E4-9 Direct method and sequential method of distributing service department costs A manufacturing company has two service and two production departments. Human Resources and Machine
E4-9 Direct method and sequential method of distributing service department costs A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the ser- vice departments. The production departments are Grinding and Polishing The following data have been estimated for next year's operations: Machine hours: Grinding, 75,000; Polishing, 25,000 Number of employees: Machine Repair, 5; Grinding, 30; Polishing, 15 The direct charges identified with each of the departments are as follows: Human resources $100,000 Machine repair 150,000 Grinding 450,000 Polishing........ 350,000 The human resources department services all departments of the company, and its costs are allocated using the numbers of employ- ees within each department, while machine repair costs are alloca- ble to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first
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