Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Proportion of Services Used by Department Direct Costs Maintenance Cafeteria Machining Assembly Machining $ 115,000 Assembly 70,000 Maintenance 55,000 — 0.2 0.5 0.3 Cafeteria 35,000 0.6 — 0.2 0.2 Required: Use the step method to allocate the service costs, using the following: a. The order of allocation starts with Maintenance. b. The allocations are made in the reverse order (starting with Cafeteria).
Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Proportion of Services Used by Department Direct Costs Maintenance Cafeteria Machining Assembly Machining $ 115,000 Assembly 70,000 Maintenance 55,000 — 0.2 0.5 0.3 Cafeteria 35,000 0.6 — 0.2 0.2 Required: Use the step method to allocate the service costs, using the following: a. The order of allocation starts with Maintenance. b. The allocations are made in the reverse order (starting with Cafeteria).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 11-30 (Algo) Cost Allocation: Step Method (LO 11-3)
Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:
| Proportion of Services Used by | |||||||||||
| Department | Direct Costs | Maintenance | Cafeteria | Machining | Assembly | ||||||
| Machining | $ | 115,000 | |||||||||
| Assembly | 70,000 | ||||||||||
| Maintenance | 55,000 | — | 0.2 | 0.5 | 0.3 | ||||||
| Cafeteria | 35,000 | 0.6 | — | 0.2 | 0.2 | ||||||
Required:
Use the step method to allocate the service costs, using the following:
a. The order of allocation starts with Maintenance.
b. The allocations are made in the reverse order (starting with Cafeteria).
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