Question -
Quantum currently allocates their repair and utility dollars to their assembly, fabricating, and finishing department using the direct method of service center cost allocation. Repair dollars are allocated using direct labor hours and utility dollars are allocated using square footage.
|
|
DLH Repair
|
Sq. Ft. Utilities
|
Assembly
|
Fabricating
|
Finishing
|
Total
|
|
Cost
|
$8,000,000
|
$10,000,000
|
$4,000,000
|
$3,500,000
|
$4,500,000
|
$30,000,000
|
|
Repair
|
5,000
|
15,000
|
6,000
|
10,000
|
9,000
|
45,000
|
|
Utilities
|
7,000
|
10,000
|
25,000
|
30,000
|
45,000
|
117,000
|
a) Calculate the amounts to be allocated to the production departments using the direct method.
b) Calculate the amounts to be allocated to the production departments using the step method.
c) Write a memo to the President explaining the differences in the results.