Question-
Airwalk Company has two service departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $120,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $18,000 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $36,000 and $60,000, respectively. Data on standard service-hours and number of employees are as follows:
|
|
Maint. Dept.
|
Personnel Dept.
|
Dept. X
|
Dept. Y
|
|
Standard service hours expected and used
|
200
|
100
|
600
|
300
|
|
Number of employees
|
5
|
15
|
25
|
20
|
- Using the direct method to allocate service department costs, determine the total amount of costs for each operating department (X and Y).
- Using the step method, if Personnel Department costs are allocated first, determine the amount of Maintenance Department cost allocated to each operating department.
Additional information-
The question relates to Accounting and it discuss about calculation of total cost of operating departments using direct method of allocation.