Question

Using the sequential method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced. It allocates Cafeteria Department costs based on the number of employees served. It has determined to allocate Janitorial costs before Cafeteria costs. It has the following information about its two service departments and two production departments, Cutting and Assembly:
Costs Square Feet Number of Employees
Janitorial Department $450,000   100       20       
Cafeteria Department 200,000   10,000       10       
Cutting Department 1,500,000   2,000       60       
Assembly Department 3,000,000   8,000       20      

The percentage (proportional) usage of the Cafeteria Department by the Assembly Department is: _________

a. 75%
b. 18.2%
c. 22.2%
d. 25%

Answer 1

Answer:

Pone Hill Company

The percentage (proportional) usage of the Cafeteria Department by the Assembly Department is: _________

 

d. 25%

Explanation:

a) Data and Calculations:

                                           Costs    Square Feet   Number of Employees

Janitorial Department    $450,000        100                        20

Cafeteria Department      200,000   10,000                        10

Cutting Department       1,500,000    2,000                       60

Assembly Department  3,000,000    8,000                       20

Janitorial departments costs = square footage service

Cafeteria department costs = number of employees

Cost Allocation:

                       Janitorial    Cafeteria      Cutting       Assembly           Total

Direct costs  $450,000   $200,000  $1,500,000  $3,000,000 $5,150,000

Janitorial       (450,000)     225,000         45,000        180,000    0

Cafeteria                           (425,000)       318,750         106,250   0

Total allocated costs                          $1,863,750   $3,286,250 $5,150,000

Allocation of costs:

Janitorial:

Cafeteria = $225,000 ($450,000 * 10,000/20,000)

Cutting = $45,000 ($450,000 * 2,000/20,000)

Assembly = $180,000 ($450,000 * 8,000/20,000)

Cafeteria:

Cutting = $318,750 ($425,000 * 60/80)

Assembly = $106,250 ($425,000 * 20/80)

Percentage usage of the Cafeteria Department by the Assembly = 25% ($106,250/$318,750 * 100)