Maintenance Department costs of $320,000 are allocated on the basis of budgeted

Question

Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:

<?xml:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" /?> <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?> Matince-------------personal-------a--------------b

Budg cost 32000--------80000-----160000-----240000
Budg maint hours na-------------800----------960----------640

Number of employess 40-------------na-----------160---------480

Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

Explanation / Answer

320/ (320 + 480) x $160,000 = $64,000

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