ACCTG 201 – COST ACCOUNTING

Support Department Cost Allocation

Problem 3

EULEVE Corporation information for January is presented here.

Maintenance Utilities
Overhead costs incurred P18,700 9,000
Service provided to:
Maintenance Dept. 10%
Utilities Dept. 20%
Producing Dept. A 40% 30%
Producing Dept. B 40% 60%
What is the total amount of Maintenance and Utilities costs allocated to A and B?

A B
a. Using direct method
b. Using step-down method
(Maintenance provides more
service than does Utilities)
c. Using algebraic method

Problem 4

JUNAFHE University offers only high-tech graduate-level programs. JUNAFHE has two principal
operating departments, Engineering and Computer Sciences, and two support departments, Facility and
Technology Maintenance and Enrollment Services. The base used to allocate facility and technology
maintenance is budgeted total maintenance hours. The base used to allocate enrollment services is number
of credit hours for a department. The Facility and Technology Maintenance budget is P350,000, while the
Enrollment Services budget is P950,000. The following chart summarizes budgeted amounts and
allocation-base amounts used by each department:

Services Provided: (Annually)

Budget Engineering Computer F&T Enrollment
Sciences Maintenance Service
Engineering P3,500,000
Computer P1,400,000
Sciences
F&T P350,000 2,000 1,000 Zero 5,000
Maintenance
(in hours)
Enrollment P950,000 24,000 36,000 2,000 Zero
Service

What is the total cost of Engineering and Computer Sciences after F&T Maintenance and Enrollment
Service cost is allocated?

Engineering Computer Sciences

a. Using direct method
b. Using step-down method
(sequence of allocation based on
the highest-percentage support
concept
c. Using algebraic method