Alpha Company has two service departments Cafeteria Services

Alpha Company has two service departments (Cafeteria Services& Maintenance Services). Alpha has two production departments (Printing Department&Binding; Department.) Cafeteria Services has costs of $140,000 and are allocated to production departments based on their number of employees. Employees are: Cafeteria Services Maintenance Services 2 Printing Department Binding Department Alpha uses the step method for service cost allocation. Use this information to determine for Alpha

Solution

Calculation of allocaation of expenses in the ratio of employee between 1 service deptt and 2 production deptt.

1. Maintenance service= $ 140000 * 2/14 = $ 20000

2. Printing Deptt = $ 140000* 4/14 = $ 40000

3 Binding Deptt= $ 140000 * 8/14 = $ 80000

Now, we apportion maintenace service cost in the production deptt. in the ratio of employee

1. Printing Deptt = $ 20000* 4/12 = $ 6667

2. Binding Deptt = $ 20000* 8/12 = $ 13333

Hence, Total allocated cost in production Deptt.

1. Printing Deptt= 40000+ 6667 = $ 46667

2. Binding Deptt = 80000 + 13333 = $ 93333