Question

4.   ABC Company has two service and three production departments. Building Maintenance and Factory office are the service departments. The production departments are ASSEMBLY, Machining and Finishing.
The following data have been estimated for next years operations:

Direct labor hours: Asswmbly,45,000; Machining,35,000;Finishing 40,000
Floor space occupied: factory office 15%; Assembly, 35%; Machining 25%, Finishing 25%
The direct charges expected to be made to the departments are as follows:
Building maintenance $120,000
Factory office $171,000
Assembly $378,000
Machining $225,000
Finishing $225000
The building maintenance department services all department of the company and its costs are allocated using floor space occupied, while factory office costs are allocated to the production departments on the basis of direct labor hours.
REQURIED: Distribute the service department cost, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.

Answer 1

in Sequential Distribution method. t step method) = machining - Particulars. Building Factory Assembly Finishing Finishin I maintenance office Direet charges 120.000 171000- Apportionment and frien of Building -_expense Bo the 120,000) 18000 bases of floor space 42000 30,000 30,000 - Apportionment of factory office expense on the basis of Labour bowers (139000) 70905 55125 63000 70875 Total : 112875 851251 93000

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