Sunshine Company Has Two Service Departments, Maintenance and Cafeteria, as Well

Sunshine Company has two service departments, Maintenance and Cafeteria, as well as two production departments, Mixing and Bottling. Maintenance costs are allocated based on square footage, while cafeteria costs are allocated based on number of employees. The following information is also available: $$\begin{array} { l l l l l } \text { Maintenance } & & \text { Cafeteria } & \text { Mixing } & \text { Bottling } \\\text { Direct dept.costs } & \$ 210,000 & \$ 180,000 & \$ 76,000 & \$ 85,000 \\\text { Square footage } & 1,000 & 2,000 & 4,000 & 3,000 \\\text { Number of employees }& 30 & 20 & 50 & 40 \\\text { Direct labor hours } & 8,000 & 6,000 & &\end{array}$$ Required:
a. Assuming the direct method is used to allocate costs, determine the amount of each service department's costs allocated to each production department.
b. Determine the cost per direct labor hour for the mixing and bottling departments.

Correct Answer:

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a. Maintenance:
3,000 + 4,000 = 7,000 sq...

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