Salerno Company has two service departments, Maintenance and Cafeteria, as well as two production departments, Mixing and Bottling
Maintenance Department costs are allocated based on square footage and Cafeteria Department costs are allocated based on number of employees. The following data was available:
Maintenance Cafeteria Mixing Bottling
Direct costs $200,000 $120,000 $76,000 $85,000
Square footage 1,000 2,000 4,000 6,000
Number of employees 30 20 60 100
Direct labor hours 8,000 6,000
Assume the direct method is used to allocate service department costs to producing departments.
Required:
A) Determine the total costs of the Mixing Department after allocating the service departments' costs.
B) Determine the total costs of the Bottling Department after allocating the service departments' costs.
A)
Service Dept. Maintenance: 4/10 × $200,000 = $80,000
Service Dept. Cafeteria: 60/160 × $120,000 = 45,000
Production Dept. Mixing: Given 76,000
Total $201,000
B)
Service Dept. Maintenance: 6/10 × $200,000 = $120,000
Service Dept. Cafeteria: 100/160 × $120,000 = $75,000
Production Dept. Bottling: Given $85,000
Total $280,000
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