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Allocating Service Department Costs

Allocating Service Department Costs
Armstrong Industries produces electronic equipment for the marine industry. Armstrong has two service departments (maintenance and computing) and two production departments (assembly and testing). Maintenance costs are allocated on the basis of square footage occupied, and computing costs are allocated on the basis of the number of computer terminals. The following data relate to allocations of service department costs:

Service department costs $400,000 $600,000
Square footage 70,000 30,000
Terminals 3 10


Allocate the service department costs to production departments using the direct method. (When calculating the percentage allocation, do not round the answer.)

Allocated to Assembly Testing
Total Cost $ $

Solution Summary

The expert examines allocating service department costs.