Woh Che Co. has four departments: Materials, Personnel, Manufacturing, and Packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Indirect Expense Cost Allocation Base
Supervision $84,000 Number of employees
Utilities 65,000 Square feet occupied
Insurance 30,000 Value of assets in use
Total $179,000

Departmental data for the company’s recent reporting period follow.

Department Employees Square Feet Asset Values
Materials 27 25,000 $6,000
Personnel 9 5,000 1,200
Manufacturing 63 55,000 37,800
Packaging 51 15,000 15,000
Total 150 100,000 $60,000

Required:
a. Use this information to allocate each of the three indirect expenses across the four departments.
b. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.

See the explanation below:

Explanation

a. Use this information to allocate each of the three indirect expenses across the four departments.

Allocation of Supervision cost

Supervision cost allocated to Materials = (27/150) * $84,000 = $15,120

Supervision cost allocated to Personnel = (9/150) * $84,000 = $5,040

Supervision cost allocated to Manufacturing = (63/150) * $84,000 = $35,280

Supervision cost allocated to Packaging = (51/150) * $84,000 = $28,560

Allocation of Utilities

Utilities allocated to Materials = (25,000/100,000) * $65,000 = $16,250

Utilities allocated to Personnel = (5,000/100,000) * $65,000 = $3,250

Utilities allocated to Manufacturing = (55,000/100,000) * $65,000 = $35,750

Utilities allocated to Packaging = (15,000/100,000) * $65,000 = $9,750

Allocation of Insurance cost

Insurance allocated to Materials = (6,000/60,000) * $30,000 = $3,000

Insurance allocated to Personnel = (1,200/60,000) * $30,000 = $600

Insurance allocated to Manufacturing = (37,800/60,000) * $30,000 = $18,900

Insurance allocated to Packaging = (15,000/60,000) * $30,000 = $7,500

b. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.

See the attached file for the summary table

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