Question

Frederick Company has two service departments (Cafeteria Services & Maintenance). Frederick has two production departments (Assembly Department & Packaging Department.) Frederick uses a step allocation method where Cafeteria Services is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Cafeteria Services has costs of $255,000 and Maintenance has costs of $175,000 before any allocations. What amount of Maintenance total cost is allocated to the Packaging Department? (round to closest whole dollar) Employees are: Cafeteria Services 4 Maintenance 5 Assembly Department 10 Packaging Department 10

Answer 1

Answer:

The Total allocation of maintenance cost of packaging department is $87,500

Explanation:

According to the given data we have the following:

The Total Maintenance cost is $175,000 before allocation.

Total employees of in Production Department is=  10 Assembly + 10 Packaging= 20

Hence, Total maintenance cost per employee = $175,000 / 20

Total maintenance cost per employee =$8,750

                                                       

Therefore, the Total allocation of maintenance cost of packaging department= Total maintenance cost per employee× Employees Packaging Department

Total allocation of maintenance cost of packaging department=$ 8,750 X 10 employees= $87,500