Motlop Manufacturing
The Motlop Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc}
&\text { Service }&\text { Service } & \text { Producing } & \text { Producing }\
&\text { Dept. 1 }&\text { Dept. 2 }&1&2\
\hline \text { Department Costs } & \$ 10000 & \$ 15000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 10000 & 5000 & 10000 & 20000 \
\text { Labour hours } & 5000 & 5000 & 12000 & 8000
\end{array}$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and labour hours respectively. Service department 1 is allocated first.
-Assuming that Motlop Manufacturing Company allocates service department 1 costs first,the amount of service department 1 costs allocated to producing 2 under the step method would be:

Question

Motlop Manufacturing
The Motlop Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc} 
&\text { Service }&\text { Service } & \text { Producing } & \text { Producing }\
&\text { Dept. 1 }&\text { Dept. 2 }&1&2\
\hline \text { Department Costs } & \$ 10000 & \$ 15000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 10000 & 5000 & 10000 & 20000 \
\text { Labour hours } & 5000 & 5000 & 12000 & 8000
\end{array}$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and labour hours respectively. Service department 1 is allocated first.
-Assuming that Motlop Manufacturing Company allocates service department 1 costs first,the amount of service department 1 costs allocated to producing 2 under the step method would be:

Quizplus · Accepted Answer

Under the step method, when Service Department 1 costs are allocated first, its costs are distributed to all other departments based on the allocation base, which is machine hours in this case. The total machine hours across all departments are 10,000 (Service Dept. 1) + 5,000 (Service Dept. 2) + 10,000 (Producing 1) + 20,000 (Producing 2) = 45,000 machine hours. Since Service Department 1 is being allocated first, its own machine hours are not included in the allocation base, leaving 35,000 machine hours (5,000 + 10,000 + 20,000). The cost of Service Department 1 ($10,000) is then allocated based on the proportion of machine hours. Producing Department 2 has 20,000 of the 35,000 machine hours, so it receives a proportion of 20,000/35,000 of the $10,000, which equals $5,714.

Motlop Manufacturing the Motlop Manufacturing Company Has Two Service Departments

Motlop Manufacturing
the Motlop Manufacturing Company Has Two Service Departments