Octavio Vazquez Corporation has two service departments, Power and Maintenance, and two production departments, Painting, and Polishing.
Question:
Octavio Vazquez Corporation has two service departments, Power and Maintenance, and two production departments, Painting, and Polishing. The following data have been estimated for next year’s operations:
Employees are paid time-and-a-half for overtime. Employer payroll tax rates are as follows:
FICA: FUTA: SUTA:
8% of first $100,000 of salary or wages 1% of first $8,000 of salary or wages 4% of first $8,000 of salary or wages
Department:
Power Maintenance Painting
Direct Charges
$450,000
120,000
235,000
Kilowatt Hours Used
20,000
50,000
100,000
Square Footage
10,000
5,000
30,000
President $3,000 Sales 2,500 Manager
Direct Labor 800 Direct Labor 600 Indirect 400 Labor
40 $600 40 500
42 100 46 150 44 80
Polishing
265,000 150,000 20,000
Required
a) For which service department would you use kilowatt-hours to allocate service costs.
b) For which service department would you use square footage to allocate service costs.
c) Distribute the service department costs using the direct distribution method. Prepare the journal entries to distribute the costs of the service departments to the production departments given the results of your calculations
Expert Answer:
a For which service department would you use kilowatthours to allocate service costs The service department that would use kilowatthours to allocate s... View the full answer
