The Maintenance Department Has Been Servicing Gizmo Production for Four

question 1

Essay

The Maintenance Department has been servicing Gizmo Production for four years. Beginning next year, the company is adding a Scrap-Processing Department to recycle the materials from Gizmo Production. As a result, maintenance costs are expected to increase from $460,000 per year to $525,000 per year. The Scrap-Processing Department will use 25% of the maintenance efforts.
Required:
a.Using the stand-alone cost-allocation method, identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.
b.Using the incremental cost-allocation method, identify the amount of maintenance cost that will be allocated to Gizmo Production and the Scrap-Processing Department next year.

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