Distribution of service department costs to production departments
Cake Products Inc, is divided into five departments, mixing, blending, finishing, factory office and building maintenance. The first three departments are engaged in production work. Factory Office and Building Maintenance are service departments. During the month of June, the following factory overhead was incurred for the various departments:
Mixing |
21,000 |
Factory |
Office |
9,000 |
Blending |
18,000 |
Building |
Maintenance |
6,400 |
Finishing |
25,000 |
The bases for distributing service department expenses to the other departments follow:
Building maintenance – on the basis of floor space occupied by the other departments as follows: mixing 10,000 sq ft, blending $4,500 sq ft, finishing 10,500 sq ft and factory office 7,000 sq ft.
Factory office – on the basis of number of employees as follows : mixing 30, blending 20 and finishing 50
Required:
Prepare schedules showing the distribution of the service departments expenses for the following:
1. The direct distribution method
2. The sequential distribution method in the order of number of other departments served.