Pope Company_Allocation of service department costs

| October 3, 2018

Pope Company
operates a free cafeteria for the benefit of its employees. Budgeted and actual
costs for the cafeteria last year are given below:

Budget

Actual

Variable
costs……..

$200,000

$168,000

Fixed
costs………….

$480,000

$504,000

The variable costs
of the cafeteria are allocated to operating departments (Machining and
Assembly) on the basis of the number of employees in these departments. Data
concerning last year are given below:

Machining

Assembly

Budgeted number
of employees……………….

60

100

Actual number of
employees……………………

40

80

Percentage of
peak-period requirements……

40%

60%

The budgeted fixed
costs in the cafeteria are allocated by the peak-period requirements.
Required:
A. Compute the
dollar amount of variable and fixed cost that should have been allocated to
each of the operating departments at the beginning of last year for planning
purposes, that is, allocate the fixed and variable overhead based on the
budgeted costs.
Machining:
Assembly:

B. (1) Compute the
dollar amount of the variable and fixed costs that should have been charged to
each of the operating departments at the end of last year for purposes of
evaluating performance. (HINT: Allocate the variable costs based on the actual
cost driver; think about whether or not you would allocate the actual fixed
overhead or the budgeted fixed overhead for evaluating performance.) (2)
Identify the amount, if any, of actual cafeteria costs that should not be
charged to Machining and Assembly. If the amount is $0, briefly discuss why. If
there is any amount other than $0, also briefly discuss why.
Machining:
Assembly:

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