126) Clark Corp. has three service departments, Chocolate, Caramel, and Nougat, as well as two production departments, Melting and Wrapping. The Chocolate and Caramel department costs are allocated based upon ounces, and the Nougat department’s costs based upon pieces. The following information is also available:

DirectNumberNumber

Departmentofof

CostsOuncesPieces

Service departments:

Chocolate$900,00010,0008,000

Caramel760,0006,4005,600

Nougat690,0007,4006,200

Production departments:

Melting260,00023,00019,400

Wrapping170,0008,40010,200

Required: Assume the step-down method of allocating costs is used, and the Chocolate department renders the greatest service, with the Caramel department a close second. Determine the amount of each service department’s costs that will be allocated to each production department.

6,400 + 7,400 + 23,000 + 8,400 = 45,200

6,400/45,200 × $900,000 = $127,434 Caramel

7,400/45,200 × $900,000 = $147,345 Nougat

23,000/45,200 × $900,000 = $457,965 Melting

8,400/45,200 × $900,000 = $167,257 Wrapping

$760,000 + $127,434 = $887,434

7,400 + 23,000 + 8,400 = 38,800

7,400/38,800 × $887,434 = $169,253 Nougat

23,000/38,800 × $887,434 = $526,056 Melting

8,400/38,800 × $887,434 = $192,125 Wrapping

$690,000 + $147,345 + $169,253 = $1,006,598

19,400 + 10,200 = 29,600

19,400/29,600 × $1,006,598 = $659,730 Melting

10,200/29,600 × $1,006,598 = $346,868 Wrapping



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