E21-1 Won
Han Co. has four departments: materials, personnel, manufacturing, and
packaging. In a recent month, the four departments incurred three shared
indirect expenses. The amounts of these indirect expenses and the bases used to
allocate them follow.
E21-1 Departmental expense Allocations
Indirect
Expense Cost Allocation Base
Supervision . . . . . . . . . . . . . . $ 75,000 Number
of employees
Utilities . . . . . . . . . . . . . . . .
. 60,000 Square
feet occupied
Insurance . . . . . . . . . . . . . . . . 16,500 Value of assets in use
Total . . . . . . . . . . . . . . . . . .
. . $151,500
Departmental
data for the company’s recent reporting period follow.
Department
Employees Square Feet Asset Values
Materials . . . . . . . . . . . . 18 27,000
$ 6,000
Personnel . . . . . . . . . . . . 6 4,500
1,200
Manufacturing . . . . . . . . 66 45,000
37,800
Packaging . . . . . . . . . . . . 30 13,500
15,000
Total . . . . . . . . . . . . . . . 120 90,000
$60,000
(1)
Use this information to allocate each of the three indirect expenses across the
four departments.
(2)
Prepare a summary table that reports the indirect expenses assigned to each of
the four departments.
Check (2) Total of $30,900 assigned to Materials Dept.
SOLUTION PREVIEW
1. Allocation
of Indirect Expenses to Four Operating Departments
Supervision
expenses
|
Department
|
Employees
|
% of Total
|
Cost
|
|
|
Materials
|
18
|
15%
|
$11,250
|
|
|
Personnel
|
6
|
5
|
3,750
|
|
|
Manufacturing
|
66
|
55
|
41,250
|
|
|
Packaging
|
30
|
25
|
18,750
|
|
