Chapter 15:Allocation of Support-Department Costs

1.The Charmatz Corporation has a central copying facility. The copying facility has only two
users, the Marketing Department and the Operations Department. The following data apply to
the coming budget year:
Budgeted costs of operating the copying facility
Fixed costs per year $61,000
Variable costs 6 cents (0.06) per copy
Budgeted long-run usage in copies per year:
Marketing Department 100,000 copies
Operations Department 400,000 copies

Budgeted amounts are used to calculate the allocation rates.

Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department
was 320,000 copies. If a single-rate cost-allocation method is used, what amount of copying facility costs will
be budgeted for the Marketing Department? (Round any intermediary calculations to the nearest cent.)
A) $18,200 B) $6000 C) $12,200 D) $21,250
FMOH costs=61,000
VMOH costs=0.06/copyx500,000=30,000
Total Costs= 61,000+30,000=91,000
MOH Rate=91,000/500,000=1.82
Total Budgeted cost allocated for the Marketing Department=1.82x100,000=18,200

2. The Charmatz Corporation has a central copying facility. The copying facility has only two
users, the Marketing Department and the Operations Department. The following data apply to
the coming budget year:
Budgeted costs of operating the copying facility
Fixed costs per year $66,000
Variable costs 5 cents (0.05) per copy
Budgeted long-run usage in copies per year:
Marketing Department 110,000 copies
Operations Department 390,000 copies

Budgeted amounts are used to calculate the allocation rates.

Actual usage for the year by the Marketing Department was 120,000 copies and by the
Operations Department was 360,000 copies. If a dual-rate cost-allocation method is used, what
amount of copying facility costs will be allocated to the Operations Department? Assume
budgeted usage is used to allocate fixed copying costs and actual usage is used to allocate
variable copying costs.
A) $69,000 B) $117,000 C) $70,980 D) $69,480
T. Variable costs=0.05x360,000=18000
T.Fixed costs=66000/500,000=0.132x390,000=51,480
Total costs=69,480

3. The Charmatz Corporation has a central copying facility. The copying facility has only two
users, the Marketing Department and the Operations Department. The following data apply to
the coming budget year:

Budgeted costs of operating the copying facility

Fixed costs per year $69,000
Variable costs 3 cents (0.03) per copy
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Budgeted long-run usage in copies per year:
Marketing Department 100,000 copies
Operations Department 360,000 copies

Budgeted amounts are used to calculate the allocation rates.

Actual usage for the year by the Marketing Department was 70,000 copies and by the Operations
Department was 330,000 copies. If a single-rate cost-allocation method is used, what amount of
copying facility costs will be allocated to the Marketing Department? Assume actual usage is
used to allocate copying costs.
A) $20,250 B) $18,000 C) $12,600 D) $2100
Total MOH costs=69,000+ (0.03x460,000)=82,800
MOH Rate=82,800/460,000= 0.18
Total costs allocated to the Marketing Department=0.18x70,000=12,600

 4.Round up your answers whenever needed:

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $300,000 are allocated on the basis of budgeted maintenance-hours.
Personnel Department costs of $100,000 are allocated based on the number of employees. The
costs of operating departments A and B are $160,000 and $240,000, respectively. Data on
budgeted maintenance-hours and number of employees are as follows:

Support Departments Production Departments

Maintenance Personnel
A B
Department Department
Budgeted costs $300,000 $100,000 $160,000 $240,000
Budgeted maintenance- NA 800 1,200 600
hours
Number of employees 50 NA 200 600

a) Using the direct method, what amount of Maintenance Department costs will be allocated to
Department B?
A) $96,000
B) $100,000
C) $110,000
D) $122,000
Answer: B
Explanation: B) Maintenance Department costs allocated to Department B = 600/ (600 + 1200)
× $300,000 = $100,000
b) Using the direct method, what amount of Personnel Department costs will be allocated to
Department A?
A) $25,000
B) $28,000
C) $30,000
D) $20,000
Answer: A
Explanation: A) Personnel Department costs allocated to Department A = 200 / (200 + 600) ×
$100,000 = $25,000

5.Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $360,000 are allocated on the basis of budgeted maintenance-hours.
Personnel Department costs of $110,000 are allocated based on the number of employees. The
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 costs of operating departments A and B are $188,000 and $282,000, respectively. Data on
budgeted maintenance-hours and number of employees are as follows:
Production
Support Departments Departments
Maintenance Personnel
A B
Department Department
$188,00 $282,00
Budgeted costs $360,000 $110,000 0 0
Budgeted maintenance- NA 880 1230 680
hours
Number of employees 60 NA 290 630

Using the direct method, what amount of Maintenance Department costs will be allocated to
Department B? (Do not round any intermediary calculations.)

A) $100,398 B) $128,168 B) $128,168 D) $167,330

Explanation: Maintenance Department costs allocated to Department B = 680 / (680 + 1230) ×
$360,000 = $128,168

6.Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $400,000 are allocated on the basis of budgeted maintenance-hours.
Personnel Department costs of $200,000 are allocated based on the number of employees. The
costs of operating departments A and B are $240,000 and $360,000, respectively. Data on
budgeted maintenance-hours and number of employees are as follows:
Production
Support Departments Departments
Maintenance Personnel
A B
Department Department
$240,00 $360,00
Budgeted costs $400,000 $200,000 0 0
Budgeted maintenance- NA 820 1240 640
hours
Number of employees 100 NA 250 600

Using the direct method, what amount of Personnel Department costs will be allocated to
Department A? (Do not round any intermediary calculations.)
A) $58,824 B) $52,632 C) $70,588 D) $141,176
Explanation: Personnel Department costs allocated to Department A = 250 / (250 + 600) ×
$200,000 = $58,824

7.In AAA Company , if the following information was provided:

Data Service Departments Production Departments

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 F&T Maint. Enrollment Engineering Computer
Sciences
Indirect Cost 150,000 100,000 375,000 700,000
Allocate ------------- 2500 1000 500
F&T Maint.

Allocate 100 -------------- 120 180

Enrollment
Cost driver 20000 50000
Solution
Data Service Departments Production Departments
F&T Maint. Enrollment Engineering Computer Sciences
Indirect Cost 150,000 100,000 375,000 700,000
Allocate (150,000) 150,000x25/40 150,000x1/4 150,000x5/40
F&T Maint. =93750 =37500 =18750

Total ------------------- 193,750 412,500 718,750

Allocate (193,750) 193,750x120/300 193,750x180/300
Enrollment =77,500 =116250
Total 490,000 835,000
Cost driver / 20,000 /50,000
Rate =24.5 16.7

Using the step-down method, what amount of F&TMaintenance Department costs will be
allocated to Department Engineering?
A.61,500 B.37,500 C.47,500 D.57,500

Using the step-down method, what amount of Enrollment Department costs will be allocated to
Department Computer Sciences?
A166,250 B.136,250 C.116,250 D.126,250

Using the step-down method, what the total MOH costs of Engineering Department will be?

A,600,000 B.490,000 C.700,000 D.550,000

Using the step-down method, what amount of F&T Maint. Department costs will be allocated to
Department Enrollment?

A,99,750 B.83,750 C.73,750 D.93,750

Using the step-down method, what MOH Rate of Engineering Department will be?

A.15.8 B.18.4 C.24.5 D.11.4

Using the step-down method, what MOH Rate of Engineering Department will be?

A.16.7 B.18.4 C.24.5 D.11.4

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 8.In Minolta Company, there are 2 service departments (Quality, Maintenance) and 2
producing departments (Machining, Assembly). Quality costs are allocated on the basis
of quality control hours and Maintenance costs are allocated on the basis of
maintenance hours.The following information was provided:

Maintenance Quality Machining Assembly

Budgeted MOH costs $200,000 $350,000 $400,000 $300,000

Maintenance hours ---------- 10,000 18,000 12,000

Quality control hours 7,000 -------- 21,000 7,000

Machine Hours --------- ---------- 50,000 ----------

Direct Labor Hours ------- --------- ---------- 25,000

Using the step-down method, what amount of Maintenance Department costs will be
allocated to Machining Department?
A.90,000 B.80,000 C.70,000 D.60,000

Using the step-down method, what amount of Quality Department costs will be allocated to
Assembly Department?
A.400,000 B.300,000 C.100,000 D.200,000

Using the step-down method, what amount of Maintenance Department costs will be allocated to Department
Quality?

A,60,000 B.50,000 C.70,000 D.55,000

Using the step-down method, what the total MOH costs of Machining Department will be
A,600,000 B.500,000 C.790,000 D.550,000

Using the step-down method, what MOH Rate of Assembly Department costs will be?

A.15.8 B.18.4 C.20 D.11.4

9...Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $350,000 are allocated on the basis of budgeted maintenance-hours.
Personnel Department costs of $110,000 are allocated based on the number of employees. The
costs of operating departments A and B are $184,000 and $276,000, respectively. Data on
budgeted maintenance-hours and number of employees are as follows:

Production
Support Departments Departments

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 Maintenance Personnel
A B
Department Department
Budgeted costs $350,000 $110,000 $184,000 $276,000
Budgeted maintenance- NA 840 1230 630
hours
Number of employees 55 NA 290 650

Data Service Departments Production Departments

Maintenance Personnel A B
Indirect Cost 350,000 110,000 184,000 276,000
Allocate (350,000) 350,000x840/2700 350,000x1230/2700 350,000x630/2700
Maintenance =108889 =159,444 =81667
Total 218889 343,444 357,667
Allocate Quality (218889) 218,889x290/940= 218,889x650/940=
67,530 151,359
Total 410,974 509,026

Using step-down, what amount of Maintenance Department costs will be allocated to

Department A? (Round your answer)
A. 231,452 B. 121,677 C. 50,111 D. 159,444

Using the direct method, what amount of Personnel Department costs will be allocated to
Department B?(Round your answer)
A.77,064 B.67,064 C.76,064 D.74,046

Using the direct method, what amount of Personnel Department costs will be allocated to Department A?
?(Round your answer)
A,34,396 B.33,936 C.34,935 D.39,336

Using the direct method, what amount of Maintenance Department will be allocated to Department A?
(Round your answer)

A,84,677 B.85,577 C.87,766 D.86,677