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Frederick Company has two service departments (Cafeteria Services & Maintenance). Frederick has two production departments (Assembly Department...

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Accounting

Frederick Company has two service departments (CafeteriaServices & Maintenance). Frederick has two productiondepartments (Assembly Department & Packaging Department.)Frederick uses a step allocation method where Cafeteria Services isallocated to all departments and Maintenance Services is allocatedto the production departments. All allocations are based on totalemployees. Cafeteria Services has costs of $280,000 andMaintenance has costs of $300,000 beforeany allocations. What amount of Maintenance total cost is allocatedto the Packaging Department? (round to closest whole dollar)Employees are:

            CafeteriaServices    5

            Maintenance    4

Assembly Department 10

Packaging Department 9

Answer & Explanation Solved by verified expert
3.7 Ratings (455 Votes)

Particulars Cafeteria Maintenance Assembly Packaging
Pre-allocation cost $        280,000 $        300,000
Allocating cost of:
Cafeteria $      (280,000) $          48,696 $      121,739 $      109,565
Balance $                   -   $        348,696 $      121,739 $      109,565
Allocating cost of:
Maintenance $      (348,696) $      183,524 $      165,172
Answer: $165,172
Workings:
Allocating cost of:
Cafeteria
To Maintenance ($ 280000 x 4/23) $         48,696
To Assembly ($ 280000 x 10/23) $      121,739
To Packaging ($ 280000 x 9/23) $      109,565
Allocating cost of:
Maintenance
To Assembly [($ 300000 + $ 48696) x 10/19) $      183,524
To Packaging [($ 300000 + $ 48696) x 9/19) $      165,172

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