The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production departments — fabrication and assembly. The distribution of each service department's efforts to the other departments is shown below: FROM TO Purchasing Maintenance Fabrication Assembly Purchasing 0 % 60 % 10 % 30 % Maintenance 20 % 0 % 30 % 50 %
The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production departments — fabrication and assembly. The distribution of each service department's efforts to the other departments is shown below:
| FROM | TO | |||||||||||
| Purchasing | Maintenance | Fabrication | Assembly | |||||||||
| Purchasing | 0 | % | 60 | % | 10 | % | 30 | % | ||||
| Maintenance | 20 | % | 0 | % | 30 | % | 50 | % | ||||
The direct operating costs of the departments (including both variable and fixed costs) were as follows:
| Purchasing | $ | 96,000 | |
| Maintenance | 18,000 | ||
| Fabrication | 72,000 | ||
| Assembly | 48,000 | ||
The total cost accumulated in the fabrication department using the step method is (assume the purchasing department goes first; calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):
Variable cost is the cost that varies with the change in output, per unit variable cost is fixed at all level of output. Fixed cost is the cost the does not vary with the change in output.
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