Answer:
The Ferre Publishing Company
Allocation of Cost to Each Department under the Direct Method;
Service Departments Operating Departments
Admini Janitorial Mainten Binding Printing Total
-stration -ance
Costs $168,000 $126,000 $57,600 $330,000 $516,000 $1,197,600
Admin. (168,000) 100,800 67,200 0
Janitorial (126,000) 36,000 90,000 0
Maintenance (57,600) 19,200 38,400 0
Total assigned cost $486,000 $711,600 $1,197,600
Explanation:
a) Data and Calculations:
Service Departments Operating Departments
Admini Janitorial Mainten Binding Printing Total
-stration -ance
Costs $168,000 $126,000 $57,600 $330,000 $516,000 $1,197,600 Number of
employees 60 35 140 315 210 760
Square feet of space
occupied 15,000 10,000 20,000 40,000 100,000 185,000 Hours of press time 30,000 60,000 90,000
Allocation basis Allocation Basis Allocation Rate Calculation
Administration Number of employees $320/employee ($168,000/525)
Janitorial Space occupied $0.90/space ($126,000/140,000)
Maintenance Hours of press time $0.64/press time ($57,600/90,000)
The direct method is one of the methods that The Ferre Publishing Company can use to allocate the overhead costs of the three service departments: Administration, Janitorial, and Maintenance to the Operating Departments: Binding and Printing. Others are the Step method and the Reciprocal method. The Step method allocates one service costs to some other service departments one by one. The Reciprocal relies on an elimination formula.
