Question
Mike's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department
Mike's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Support Departments Production Departments
Maintenance Department Personnel Department A B
Budgeted costs $320,000 $80,000 $160,000 $240,000
Budgeted maintenance-hours NA 800 960 640
Number of employees 40 NA 160 480
a.Using the direct method, what amount of Maintenance Department costs will be allocated to Department B? (10 points)
b.Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first?
(10 points)
Step by Step Solution
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Step: 1
a Using the direct method the amount of Maintenance Department costs allocated to Department B can be calculated by directly allocating the costs of t...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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