Question

Support Department Cost Allocation-Direct Method Charlie's Wood Works produces wood products (e.g., cabinets, tables, picture frames, and so on). Production departments include Cutting and Assembly. The Janitorial and Security departments support the Cutting and Assembly departments. The Assembly Department spans about 42,560 square feet and holds assets valued at about $77,520. The Cutting Department spans about 33,440 square feet and holds assets valued at about $126,480. Charlie's Wood Works allocates support department costs using the direct method. If costs from the Janitorial Department are allocated based on square feet and costs from the Security Department are allocated based on asset value.

a. Determine the percentage of Janitorial costs that should be allocated to the Assembly Department.
b. Determine the percentage of Security costs that should be allocated to the Cutting Department.

Answer 1

56% of the Janitorial costs should be allocated to the Assembly Department, based on square footage, and 62% of the Security costs should be allocated to the Cutting Department, based on asset value.

Step-by-step explanation:

To allocate the Janitorial costs to the Assembly Department, first calculate the total square footage of both departments: Assembly Department (42,560 sq ft) + Cutting Department (33,440 sq ft) = 76,000 sq ft. The percentage for the Assembly Department is then the Assembly's square footage divided by the total square footage: 42,560 sq ft / 76,000 sq ft = 0.56 or 56%.

For the Security costs allocation, calculate the total asset value: $77,520 (Assembly) + $126,480 (Cutting) = $204,000. The percentage to be allocated to the Cutting Department is based on its share of the total asset value: $126,480 / $204,000 = 0.62 or 62%.

Answer 2

a. 56%

b. 62%

Step-by-step explanation:

a. Janitorial costs are allocated based on square feet.

Assembly Department Square feet = 42,560

Total area for both departments = 42,560 + 33,440 = $76,000

Percentage of costs

= 42,560/ 76,000

= 56%

b. Security costs are allocated based on asset value.

Cutting Department Asset Value = $126,480

Total asset value for both departments = 77,520 + 126,480 = $204,000

Percentage of costs

= 126,480/ 204,000

= 62%