Diane\'s Pottery Manufacturing Company has two support departments, Maintenance

Question

Diane's Pottery Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and $15,000, respectively.

Data on standard service hours and number of employees are as follows:

What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method?

a.$25,000

b.$15,000

c.$17,250

d.$27,250

Maint. Person. Dept. Dept. Dept. Dept. X Y Standard service hours used 100 75 600 300 Number of employees 50 100 150 150 Direct labor hours 125 125 500 250

Explanation / Answer

Calculate total cost of Dept Y :

So answer is d) $27250

Dept Y Direct cost 15000 Allocation of maint dep (30000*300/900) 10000 Allocation of person dep (4500*150/300) 2250 Total 27250

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