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Wilson Publishing's four productive units are supported by three service departments: Maintenance, Food services, and Information technology. Maintenance costs are allocated to other units based
Wilson Publishing's four productive units are supported by three service departments: Maintenance, Food services, and Information technology. Maintenance costs are allocated to other units based on square footage, food services costs are allocated to other units based on number of employees, and information technology costs are allocated to other units based on number of PCs in use. Below is a listing of data for each unit: Square Footage Employees PCs in Use Direct Costs Design 2,400 4 6 $ 400,000 Printing 6,000 8 9 1,800,000 Binding 3,000 3 2 650,000 Warehousing 9,000 3 3 180,000 Maintenance 1,000 1 225,000 Food services 3,000 1 260,000 Information technology 1,000 3 6 190,000 Each department should prepare a cost allocation of his or her costs to other units, using both a direct and a step allocation approach. It is agreed that the step allocations would occur in the following order: (a) Maintenance, (b) Food services, and (c) Information technology. Each production supervisor should calculate his or her total costs under both approaches. 423 2 Direct Allocation: Mainten- Information Food services Design Printing Binding Ware- housing ance technology Cost incurred $ 225,000 $ 260,000 $ 190,000 $ 400,000 $ 1,800,000 $ 650,000 $ 180,000 Maintenance Food services IT Total cost $ $ $ $ Maintenance allocations: Food services allocations: IT allocations: 69 69 Step Allocation: Mainten- Information Ware- Food services Design Printing Binding ance technology housing Cost incurred $ 225,000 $ 260,000 $ 190,000 $ 400,000 $ 1,800,000 $ 650,000 $ 180,000 Maintenance Food services IT Total cost $ $ $ $ Maintenance allocations: Food services allocations: IT allocations
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