Question

The Ferre Publishing Company has three service departments and two operating departments. Selected data from a recent period on the five departments follow:_____.
Service Departments Operating Departments
Administration Janitorial Maintenance Binding Printing Total
Costs $168,000 $126,000 $57,600 $330,000 $516,000 $1,197,600
Number of employees 60 35 140 315 210 760
Square feet of space occupied 15,000 10,000 20,000 40,000 100,000 185,000
Hours of press time 30,000 60,000 90,000
Required:
Assuming that the company uses the direct method rather than the step-down method to allocate service department costs, how much cost would be assigned to each operating department? (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Answer 1

Answer:

The Ferre Publishing company

Service Costs Assigned to each Operating Department:

                                Service Departments               Operating Departments

              Admin.    Janitorial    Mainten.       Binding      Printing    Total

Costs  $168,000   $126,000   $57,600     $330,000  $516,000 $1,197,600

Admin (168,000)                                             100,800     67,200     0

Janitorial                (126,000)                          36,000     90,000      0

Maintenance                            (57,600)          19,200     38,400      0

Total cost                                                    $486,000   $711,600 $1,197,600

Explanation:

a) Data and Calculations:

                                Service Departments               Operating Departments

                 Administration Janitorial Maintenance     Binding      Printing    Total

Costs          $168,000        $126,000     $57,600     $330,000  $516,000   $1,197,600

Number of

employees           60                    35              140              315         210    760

Square feet of

space occupied 15,000       10,000       20,000        40,000      100,000    185,000

Hours of

press time                                                                     30,000      60,000     90,000

Allocation bases:

Administration cost = Number of employees 525

Janitorial cost = Square feet 140,000

Maintenance cost = Hours of press time 90,000

Allocation Rates and to Operating Departments:

Administration $168,000/525 = $320 per employee

Binding = 315 * $320 = $100,800

Printing = 210 * $320 = $67,200

Janitorial costs = $126,000/140,000 = $0.90 per square feet

Binding = 40,000 * $0.90 = $36,000

Printing = 100,000 * $0.90 = $90,000

Maintenance costs = $57,600/90,000 = $0.64 per press hour

Binding = 30,000 * $0.64 = $19,200

Printing = 60,000 * $0.64 = $38,400