Question

Frederick Company has two service departments (Cafeteria Services & Maintenance). Frederick has two production departments (Assembly Department & Packaging Department.) Frederick uses a step allocation method where Cafeteria Services is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Cafeteria Services has costs of $275,000 and Maintenance has costs of $270,000 before any allocations. What amount of Maintenance total cost is allocated to the Packaging Department? (round to closest whole dollar) Employees are: Cafeteria Services 6 Maintenance 4 Assembly Department 8 Packaging Department 8

Answer 1

Answer:

Maintenance total cost: 325,000

Cost Allocated to Packagin from Maintenance 162,500

Explanation:

$\left[\begin{array}{ccccc}&Maintenance&Cafeteria&Assembly&Packaging\\Employees&4&&8&8\\Direct \: Cost&270,000&275,000&&\\Allocate C&55,000&-275,000&&\\Subtotal&325,000&&110,000&110,000\\Allocate M&-325,0004&-15,760&-162,500&-162,500\\Total&&&272,500&272,500\\\end{array}\right]$

We will divide the cafeteria cost by the sum of employees of the department and maintenance.

4+8+8 = 20

275,000/20 = 13,750

Then we multiply this by each department employees and add them to their cost.

Maintenance total cost after adding cafeteria is 325,000

Then we do the same, we divide this amount for the emplyees of the processsing department:

8 + 8 = 16

325,000/16 =20,325.5

Then we multiply by 8 employees: 162,500

Maintenance total cost: 325,000

Cost Allocated to Packagin from Maintenance: 162,500