Question:
Cost Allocation: Direct Method
Warren Ltd. has two production departments, Building A and Building B, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of June follow:
|
Proportion of Services Used by
|
|
Department
|
Direct Costs
|
Maintenance
|
Cafeteria
|
Building A
|
Building B
|
|
|
|
|
|
|
|
|
Building A
|
$990,000
|
|
|
|
|
|
Building B
|
644,000
|
|
|
|
|
|
Maintenance
|
400,000
|
-
|
0.2
|
0.5
|
0.3
|
|
Cafeteria
|
320,000
|
0.8
|
-
|
0.1
|
0.1
|
Required
Compute the allocation of service department costs to producing departments using the direct method.