Cost Allocation: Direct Method University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.
The following data appear in the company records for the current period:
Maintenance Personnel Printing Developing
Machine-hours — 1,000 1,000 3,000
Labor-hours 500 — 500 2,000
Department direct costs $15,000 $36,000 $45,000 $30,000
Required:
Use the direct method to allocate these service department costs to the operating departments.