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Christmas Timber, Inc., produces Christmas trees. The trees are produced through a cutting and pruning process. Machine maintenance and janitorial labors are performed throughout the production process by nonproduction employees. Maintenance and janitorial costs are allocated based on machine hours used and the number of trees in each department, respectively. The company estimates that the cutting and pruning areas typically have about 16 and 64 trees, respectively, in them at 1 time. The company also estimates that the cutting process requires about 9 times as many machine hours as the pruning process. The total costs of each department are as follows:
Maintenance Department $7,000
Janitorial Department 4,000
Cutting Department 58,000
Pruning Department 13,000
Using the direct method of support department cost allocation, determine the total cost of each production department after allocating all support costs to the production departments.
Cutting
Department Pruning
Department
Production departmentsʼ total costs $ $

Sagot :

Anthougoidn

Answer:

Christmas Timber, Inc.

Total costs of each production department:

Cutting  Department                              $ 65,100  

Pruning  Department                             $ 16,900    

Production departmentsʼ total costs   $82,000

Explanation:

a) Data and Calculations:

Allocation of service departments' costs to production departments:

Maintenance costs = machine hours used

Janitorial costs = number of trees

                              Cutting       Pruning

Number of trees      16                64

Machine hours         9                    1

                          Maintenance   Janitorial     Cutting       Pruning     Total

Total costs             $ 7,000         $ 4,000     $ 58,000     $ 13,000   $82,000

Maintenance costs (7,000)                               6,300            700               0

Janitorial costs                             (4,000)            800         3,200               0

Total costs                                                    $ 65,100   $ 16,900    $82,000

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