Problem A

1. Under the direct method, what percentage of PM should be allocated to Machining?

2. Under the direct method, what percentage of PM should be allocated to Assembly?

3. Under the direct method, how much of the total allocable cost attributable to PM should be allocated to Machining?

4. Under the direct method, how much of the total allocable cost attributable to PM should be allocated to Assembly?

5. Under the direct method, what percentage of IT should be allocated to Machining?

6. Under the direct method, what percentage of IT should be allocated to Assembly?

7. Under the direct method, how much of the total allocable cost attributable to IT should be allocated to Machining?

8. Under the direct method, how much of the total allocable cost attributable to IT should be allocated to Assembly?

Problem B

1. Under the step method, what percentage of PM should be allocated to IT?

2. Under the step method, what percentage of PM should be allocated to Machining?

3. Under the step method, what percentage of PM should be allocated to Assembly?

4. Under the step method, how much of the total allocable cost attributable to PM should be allocated to IT?

5. Under the step method, how much of the total allocable cost attributable to PM should be allocated to Machining?

6. Under the step method, how much of the total allocable cost attributable to PM should be allocated to Assembly?

7. Under the step method, what percentage of IT should be allocated to PM?

8. Under the step method, what percentage of IT should be allocated to Machining?

9. Under the step method, what percentage of IT should be allocated to Assembly?

10. Under the step method, how much of the total allocable cost attributable to IT should be allocated to PM?

11. Under the step method, how much of the total allocable cost attributable to IT should be allocated to Machining?

12. Under the step method, how much of the total MOH cost attributable to IT should be allocated to Assembly?

Problem C

1. Using the reciprocal method, what is the formula for determining the total PM costs that should be allocated?

PM = 500,000 + .2IT

PM = 500,000 + .2(450,000)

PM = 450,000 + .1IT

PM = 500,000 + .1(450,000)

2. Using the reciprocal method, what is the formula for determining the total IT costs that should be allocated?

IT =500,000 + .1PM

IT = 450,000 + .1PM

IT = 450,000 + .2(500,000)

IT = 500,000 + .1(450,000)

Background information for all problems: Chekley Manufacturing has two production departments (Machining and Assembly). They have two service departments that provide services to each other and to production (Plant Maintenance and IT) Chekley believes Plant Maintenance (PM) should be allocated based on square footage and IT should be allocated based on computer hours. Chekley allocates Plant Maintenance first when allocating using the step method You have the following additional information Total manufacturing costs COSTS Plant maintenance Information systems Machining Assembly $500,000 450,000 2,000,000 3,150,000 6,100,000 Computer hours Square Feet Plant maintenance Information systems Machining Assembly 4,000.00 8,000.00 2,000.00 4,000.00 12,000.00 24,000.00 6,000.00 8,000.00 24,000.00 44,000.00 Background information for all problems: Chekley Manufacturing has two production departments (Machining and Assembly). They have two service departments that provide services to each other and to production (Plant Maintenance and IT) Chekley believes Plant Maintenance (PM) should be allocated based on square footage and IT should be allocated based on computer hours. Chekley allocates Plant Maintenance first when allocating using the step method You have the following additional information Total manufacturing costs COSTS Plant maintenance Information systems Machining Assembly $500,000 450,000 2,000,000 3,150,000 6,100,000 Computer hours Square Feet Plant maintenance Information systems Machining Assembly 4,000.00 8,000.00 2,000.00 4,000.00 12,000.00 24,000.00 6,000.00 8,000.00 24,000.00 44,000.00