he Factory Supervision team's costs of $35,000 are allocated based on the payroll dollars in the other These departments receive the allocation of all three of Alltech's service departments; Engineering, allocation process nor the basis for any of the service department allo Maintenance, and Factory Supervision. Engineering allocates its $45,000 of costs based on engineering lepartments. The table below provides he payroll amounts for the most recent production cycle. The direct costs for the production departments are not given here, as they are neither part of the hours in each of the other departments. The Engineering hours table below gives the usage Engineering hours in the latest production cycle. User Department Engineering Hours Percentage of Total .20 Networks 14,000 56,000 Terminals .80 Marketing Engineering 0. Maintenance 0. Factory Supervision 0. Totals 70,000 1.0 The Maintenance Department costs of $64,000 are allocated based on the square footage in each of the ther departments. The table below gives these square footages. Self-service is ignored in the table. Square Footage 80,000 Iser Department Percentage of Total .32 etworks 60,000 .24 erminals 60,000 20,000 .24 Marketing ngineering actory Supervision Totals .08 30,000 .12 250,000 1.00 Again, self-service is ignored. Payroll Dollars $360,000 $240,000 $0 $120,000 $80,000 $800,000 User Department Percentage of Total Networks .45 Terminals .30 Marketing Engineering Maintenance 01 .15 .10 Totals 1.0
he Factory Supervision team's costs of $35,000 are allocated based on the payroll dollars in the other These departments receive the allocation of all three of Alltech's service departments; Engineering, allocation process nor the basis for any of the service department allo Maintenance, and Factory Supervision. Engineering allocates its $45,000 of costs based on engineering lepartments. The table below provides he payroll amounts for the most recent production cycle. The direct costs for the production departments are not given here, as they are neither part of the hours in each of the other departments. The Engineering hours table below gives the usage Engineering hours in the latest production cycle. User Department Engineering Hours Percentage of Total .20 Networks 14,000 56,000 Terminals .80 Marketing Engineering 0. Maintenance 0. Factory Supervision 0. Totals 70,000 1.0 The Maintenance Department costs of $64,000 are allocated based on the square footage in each of the ther departments. The table below gives these square footages. Self-service is ignored in the table. Square Footage 80,000 Iser Department Percentage of Total .32 etworks 60,000 .24 erminals 60,000 20,000 .24 Marketing ngineering actory Supervision Totals .08 30,000 .12 250,000 1.00 Again, self-service is ignored. Payroll Dollars $360,000 $240,000 $0 $120,000 $80,000 $800,000 User Department Percentage of Total Networks .45 Terminals .30 Marketing Engineering Maintenance 01 .15 .10 Totals 1.0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Part 1: Allocate the costs of the 3 service departments using the direct method.
Part 2: Allocate the costs of the 3 service departments using the step method, with the order determined by the greater percentage usage.
Part 3: Allocate the costs of the 3 service departments using the reciprical method.
Part 4:What is one strength and one drawback of each of the methods?
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