Question
Krum Lawn Equipment has five departments, of which Casting and Finishing are producing departments. Maintenance, Product Movement, and Inspection are service departments. The distribution of
Krum Lawn Equipment has five departments, of which Casting and Finishing are producing departments. Maintenance, Product Movement, and Inspection are service departments. The distribution of the service departments is as follows:
Service Departments & Their Total Costs | Percent of Services Provided To | ||||||||||
Maintenance | Product Movement | Inspection | Casting | Finishing | |||||||
Maintenance | $84,000 | 0% | 5% | 25% | 50% | 20% | |||||
Product Movement | $160,000 | 0% | 10% | 5% | 45% | 40% | |||||
Inspection | $38,000 | 0% | 15% | 5% | 20% | 60% | |||||
Required:
Use the direct method to allocate the service departments costs. Prepare a schedule showing the total costs allocated to each department.
2) Broadway Department Store allocates the personnel and payroll department costs to the sales departments of Shoes, Automotive, and Clothing. Human resources (personnel) and payroll also provide services to each other. Personnel costs are allocated by number of employees and payroll costs are allocated by gross payroll. Costs and other information for January were as follows:
Personnel | Payroll | Shoes | Automotive | Clothing | |||||
Current Costs | $ 13,800 | $ 6,400 | $ 24,400 | $ 40,000 | $ 31,500 | ||||
Gross Payroll | $ 3,000 | $ 1,500 | $ 5,600 | $ 8,700 | $ 4,050 | ||||
Number of Employees | 5 | 3 | 8 | 15 | 4 | ||||
Required:
Prepare a schedule that includes the total cost of operating the sales departments for January. Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept.
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