Hang 10 Manufacturers has two service departments, Factory Administration and Maintenance and two producing departments, A and B. Selected information relating to these departments are as follows: Service DepartmentsProducing Departments Factory AdministrationMaintenanceABNumber of employees 30 50 400 550Total labour hours 4 000 6 000 80 000 120 000Overhead costsR600 000R500 000R1 700 000R2 400 000 Hang 10 Manufacturers allocates service department costs using the step method. Costs of Factory Administration are allocated on the basis of the number of employees. Costs of Maintenance are allocated on the basis of labour hours. Allocation begins with the Factory Administration Department.

The step down method alloactes the service department cost to other service department costs also.

Answered: Hang 10 Manufacturers has two service…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter5: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 1BE: Charlies Wood Works produces wood products (e.g., cabinets, tables, picture frames, and so on)....

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Hang 10 Manufacturers has two service departments, Factory Administration and Maintenance and two producing departments, A and B. Selected information relating to these departments are as follows:

	Service Departments	Producing Departments
	Factory Administration	Maintenance	A	B
Number of employees	30	50	400	550
Total labour hours	4 000	6 000	80 000	120 000
Overhead costs	R600 000	R500 000	R1 700 000	R2 400 000

Hang 10 Manufacturers allocates service department costs using the step method. Costs of Factory Administration are allocated on the basis of the number of employees. Costs of Maintenance are allocated on the basis of labour hours.

Allocation begins with the Factory Administration Department.

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