Problem 17-25 Dual Allocation of Service Department Costs (LO 17-1, 17-2)

Skip to question

[The following information applies to the questions displayed below.] Tampa Instrument Company manufactures gauges for construction machinery. The company has two production departments: Machining and Assembly. There are three service departments: Maintenance, Human Resources (HR), and Computer Aided Design (CAD). The usage of these service departments output during the year just completed is as follows:

Provision of Service Output (in hours of service)
		Provider of Service
User of Service	HR		Maintenance		CAD
HR
Maintenance		500
CAD		500				500
Machining		3,000				4,000				4,500
Assembly		6,000				4,500				1,500
Total		10,000				9,000				6,000

The budgeted costs in Tampa Instrument Companys service departments during the year are as follows:

	HR		Maintenance		CAD
Variable	$	51,000			$	90,000			$	51,000
Fixed		270,000				139,500				360,000
Total	$	321,000			$	229,500			$	411,000

When Tampa Instrument Company established its service departments, the following long-run needs were anticipated.

Long-Run Service Needs (in hours of service)
		Provider of Service
User of Service	HR		Maintenance		CAD
HR
Maintenance		1,500
CAD		500				2,500
Machining		3,000				4,500				4,200
Assembly		5,000				2,000				1,800
Total		10,000				9,000				6,000

Required: Use dual cost allocation in conjunction with each of the following methods to allocate Tampa Instrument Companys service department costs: (1) direct method and (2) step-down method.

Problem 17-25 Part 1

1. Direct method combined with dual allocation. a. Variable costs b. Fixed costs c. Total costs allocated