The Maintenance Department Has Been Servicing the Production of Gizmos

Essay

The maintenance department has been servicing the production of gizmos manufacturing for three years. During this time its costs have varied very little. Beginning next year the company is adding a scrap recycling department to recycle the scrap materials from widget processing. It is anticipated that the maintenance department's cost will increase from $960,000 to $1,000,000. The recycling department will utilize 20 percent of the maintenance efforts.
Required:
a. Calculate the allocation of the maintenance costs to gizmos and recycling if the incremental allocation method is used.
b. Calculate the allocation of the maintenance costs to gizmos and recycling if the stand-alone allocation method is used.