Krum Lawn Equipment has five departments of which Casting an

Krum Lawn Equipment has five departments, of which Casting and Finishing are producing departments. Maintenance, Product Movement, and Inspection are service departments. The distribution of the service departments is as follows:

Service Departments & Their Total Costs

Percent of Services Provided To

Maintenance

Product Movement

Inspection

Casting

Finishing

Maintenance

$84,000

0%

5%

25%

50%

20%

Product Movement

$160,000

0%

10%

5%

45%

40%

Inspection

$38,000

0%

15%

5%

20%

60%

Required:

Use the direct method to allocate the service departments’ costs. Prepare a schedule showing the total costs allocated to each department.

2) Broadway Department Store allocates the personnel and payroll department costs to the sales departments of Shoes, Automotive, and Clothing. Human resources (personnel) and payroll also provide services to each other. Personnel costs are allocated by number of employees and payroll costs are allocated by gross payroll. Costs and other information for January were as follows:

Personnel

Payroll

Shoes

Automotive

Clothing

Current Costs

$ 13,800

$ 6,400

$ 24,400

$ 40,000

$ 31,500

Gross Payroll

$ 3,000

$ 1,500

$ 5,600

$ 8,700

$ 4,050

Number of Employees

5

3

8

15

4

Required:

Prepare a schedule that includes the total cost of operating the sales departments for January. Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept.

Service Departments & Their Total Costs	Percent of Services Provided To
Maintenance	Product Movement	Inspection	Casting	Finishing
Maintenance	$84,000	0%	5%	25%	50%	20%
Product Movement	$160,000	0%	10%	5%	45%	40%
Inspection	$38,000	0%	15%	5%	20%	60%

Solution

Solution 1:

Note: As multiple questions are posted, i have answered first question as per chegg policy, kindly post separate question for answer of remaining.

From	Service Department Cost Allocation - Direct Method
Service Department	Production Department
Maintenance	Product Movement	Inspection	Casting	Finishing
Service department charges	$84,000	$160,000	$38,000
Maintenance (50:20)	-$84,000			$60,000	$24,000
Product Movement (45:40)		-$160,000		$84,706	$75,294
Inspection (20:60)			-$38,000	$9,500	$28,500
Total	$0	$0	$0	$154,206	$127,794