Apex Company’s copy department, which does almost all of the photocopying

Apex Company’s copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of 4,977,300 copies:

Salaries (fixed) $101,200
Employee benefits (fixed) 10,300
Depreciation of copy machines (fixed) 12,700
Utilities (fixed) 4,300
Paper (variable, 1 cent per copy) 49,773
Toner (variable, 1 cent per copy) 49,773


The costs are assigned to two cost pools, one for fixed and one for variable costs. The costs are then assigned to the sales department and the administrative department. Fixed costs are assigned on a lump-sum basis, 40 percent to sales and 60 percent to administration. The variable costs are assigned at a rate of 2 cents per copy.

Assuming 4,777,300 copies were made during the year, 2,480,500 for sales and 2,296,800 for administration, calculate the copy department costs allocated to sales and administration.

Costs allocated to sales $
Costs allocated to administration $

Problem 6-2
Kiddo Company manufactures and ships children’s stuffed animals across the nation. The following are profit statements for the company’s two lines of business:

Stock Stuffed
Animals (Stock) Custom Stuffed
Animals (Custom)
Sales $7,128,000 $4,752,000
Less direct costs 2,500,000 4,000,000
Less allocated costs 3,380,000 1,160,000
Income (loss) before taxes $1,248,000 $(408,000)

Costs that are easily associated with each line of business are included in the direct costs. Allocated costs include costs that are not directly traced to the business units. These costs include employee benefits, rent, telecommunications costs, and general and administrative costs, such as the salary of the CEO of Kiddo.

At the start of 2014, allocated costs were estimated as follows:

Employee benefits $1,410,000
Rent 1,530,000
Telecommunications 493,000
General and administrative costs 1,107,000
Total $4,540,000

In the past, allocations have been based on headcount (the number of employees in each business unit). There were 270 employees in Stock and 90 employees in Custom. The new controller of Kiddo believes that the key driver of employee benefits and telecommunications costs is headcount. However, rent is driven by space occupied, and general and administrative costs are driven by relative sales. Kiddo rents 41,000 square feet; approximately 20,500 is occupied by Stock employees and 20,500 by Custom personnel.

Prepare profit reports for Stock and Custom, assuming the company allocates costs using headcount, space occupied, and sales as allocation bases. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)


Snowcap Electronics is a manufacturer of data storage devices. Snowcap consists of two service departments (maintenance and computing) and two production departments (assembly and testing). Maintenance costs are allocated on the basis of square footage occupied, and computing costs are allocated on the basis of the number of computer terminals. The following data relate to allocations of service department costs:

Maintenance Computing Assembly Testing
Service department costs $624,000 $1,040,000
Square footage 119,250 39,750
Terminals 36 64

Allocate the service department costs to production departments using the direct method. (Round answers to 0 decimal places, e.g. 15,252.)

Alloction of cost
Service depts. Assembly Testing
Maintenance $ $
Computing
Total $ $