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Problem 17-33 Student Name:
Class:
1. Reciprocal-services method:
Equations:
M = 48,000 + .2C
C = 250,000 + .1M
where M denotes the total cost of the Maintenance Department
C denotes the total cost of the Computing Department
Solution of equations:
Maintenance Department budgeted costs *
Computing Department budgeted costs *
Computing proportion *
Maintenance proportion *
M = *
C = *
Allocation:
Maintenance Computing Etching Finishing
Traceable costs * *
Allocation of Maintenance Department costs * * * * * * * *
Allocation of Computing Department costs * * * * * * *
Total service department costs allocated
* *
Overhead costs traceable to production departments * *
Total overhead cost * *
Direct-labor hours (DLH) * *
Overhead rate per hour * *
Check on allocation procedure:
Service department costs allocated to Etching *
Service department costs allocated to Finishing *
Total costs to be allocated *
2. Which of the three methods of service department cost allocation results in the most
accurate overhead rates? Why?
Service Departments
Production Departments
Problem 17-33 Student Name:
Class:
1. Reciprocal-services method:
Equations:
M = 96,000 + .2C
C = 500,000 + .1M
where M denotes the total cost of the Maintenance Department
C denotes the total cost of the Computing Department
Solution of equations:
Maintenance Department budgeted costs 96,000$
Allocation:
Maintenance Computing Etching Finishing
Traceable costs 96,000$ 500,000$
Allocation of Maintenance Department costs (200,000) 0.1 20,000 0.1 20,000$ 0.1 160,000$ 0.8
2. Which of the three methods of service department cost allocation results in the most
accurate overhead rates? Why?
The direct allocation method ignores any service rendered by one service department to
another. Allocation of each service department's total cost is made directly to the production
Instructor
McGraw-Hill/Irwin
Service Departments
Production Departments
