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7 July, 13:11

Support department cost allocation-direct method Becker Tabletops has two support departments (Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows: Support Department Cost Driver Janitorial Department Square footage to be serviced Cafeteria Department Number of employees Janitorial Department Cafeteria Department Cutting Department Assembly Department Department costs $320,000 $170,000 $1,490,000 $670,000 Square feet 40 5,000 600 2,400 Number of employees 8 3 36 4 Allocate the support department costs to the production departments using the direct method.

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  1. 7 July, 15:18
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    Using the direct method, total cost allocated to Cutting Department is $211,333 while total cost allocated to Assembly Department is $278,667.

    Explanation:

    Step 1: Calculation of the allocation of costs from Janitorial Department to Cutting and Assembly Departments

    For Janitorial Department, square meter is used as the relevant basis of allocation and the following formula will be used:

    Cost allocated to a Department = (Department's Square meter : Total Square meter) * Total cost of the Department being allocated

    Therefore,

    Janitorial Department Cost allocated to Cutting Department = (26 : 30) * $170,000 = $64,000

    Janitorial Department Cost allocated to Assembly Department = (4 : 30) * $170,000 = $256,000

    Step 2: Calculation of the allocation of costs from Cafeteria Department to Cutting and Assembly Departments

    For Cafeteria Department, number of employee is used as the relevant basis of allocation and the following formula will be used:

    Cost allocated to a Department = (Department's number of employees : Total Square meter) * Total cost of the Department being allocated

    Therefore,

    Cafeteria Department Cost allocated to Cutting Department = (600 : 3,000) * $320,000 = $147,333

    Cafeteria Department Cost allocated to Assembly Department = (2,400 : 3,000) * $320,000 = $22,667

    Step 3: Calculation of Total Cost Allocated to each department

    Total cost allocated to Cutting Department = $64,000 + $147,333 = $211,333

    Total cost allocated to Assembly Department = $256,000 + $22,667 = $278,667

    Conclusion

    Therefore, using the direct method, total cost allocated to Cutting Department is $211,333 while total cost allocated to Assembly Department is $278,667.
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