Question

University Printers has two service departments Maintenance and Personnel and two operating departments Printing and Developing. Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:
Maintenance Personnel Printing Developing
Machine-hours ? 455 455 2,590
Labor-hours 315 ? 294 1,491
Department direct cost 11,000 $23,000 $25,000 $23,000
Required: Allocate the service department costs using the reciprocal method. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.

Answer 1

Machine hour percentages -Allocation of Maintenance Costs

455 + 455 + 2,590 = 3,500 total machine hrs

Personnel = 455 / 3,500 = 13%

Printing = 455 / 3,500 = 13%

Developing = 2,590 / 3,500 = 74%

Labor hr. percentages--Allocation of Personnel costs

315 + 294 + 1,491 = 2,100 total labor hrs.

Maintenance = 315 / 2,100 = 15%

Printing = 294 / 2,100 = 14%

Developing = 1,491 / 2,100 = 71%

Service

Maintenance Personnel Printing Developing

Costs before allocation 11,000 23,000 25,000 23,000

Allocate maintenance costs -11,000 1,430 1,430 8,140

0 24,430

Allocate personnel costs 3664.5 -24430 3420.2 17345.3

Allocate maintenance costs -3664.5 476.39 476.39 2711.73

Allocate personnel costs 71.46 -476.39 66.69 338.24

Allocate maintenance costs -71.46 9.29 9.29 52.88

Allocate personnel costs 1.39 -9.29 1.3006 6.5959

Allocate maintenance costs -1.39 0 0 1.39

Total costs 0.00 0.00 30403.87 51596.13

Workings

Allocate maintenance costs

Personnel = (11000 * 13%) = 1430

Printing = (11000 * 13%) = 1430

Developing = (11000 * 74%) = 8140

Allocate personnel costs

Maintenance = 24430 * 15% =

Printing = (24430 * 14%) =

Developing = (24430 * 71%) =

Allocate maintenance costs

Personnel = (3664.5 * 13%)

Printing = (3664.5 * 13%)

Developing = (3664.5 * 74%)

Allocate personnel costs

Maintenance = (476.39 * 15%)

Printing = (476.39 * 14%)

Developing = (476.39 * 71%)

Allocate maintenance costs

Personnel = (71.46 * 13%)

Printing = (71.46 * 13%)

Developing = (71.46 * 74%)

Allocate personnel costs

Maintenance= (9.29 * 15%)

Printing = (9.29 * 14%)

Developing = (9.29 * 71%)