Question 2
Williston machining is small manufacturing firm with two production departments finishing
and assembly. It is two service departments, maintenance and the cafeteria, serve both
production departments. During the current period, the direct costs incurred in each
department follow:
Department Direct cost
Maintenance $ 110,000
Cafeteria 17,600
Finishing 1,190,000
Assembly 640,000
Total $1,957,600
Maintenance costs are allocated on the basis of repair hours, cafeteria costs are allocated on
the basis of the number of employees in each department. For the current period, the
following table summarizes the usage of service by other service by other service cost centers
and other departments:
Department Service department
Maintenance (S1) Cafeteria (S2)
(Repair-hours) (Employees)
Maintenance 0 25
Cafeteria 3,000 0
Finishing (P1) 7,400 25
Assembly (P2) 4,600 50
Total 15,000 100
Required
1. Compute the service cost allocated to each production department using the step
method.
2. Using the reciprocal method for service cost allocations, what are the total costs in
each of the two production department, Finishing (P1) and Assembly (P2)?
