Peterson Company has two service departments (Cafeteria and Human Resources) and

Question

Peterson Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows.

Cafeteria               40

Human Resources 60

Machining              200

Assembly               300

Peterson uses the direct method of cost allocation and allocates cost on the basis of employees. If Human Resources cost amounts to $1,800,000, how much of the department's cost would be allocated to Machining?

$720,000

$720,000

Explanation / Answer

$600,000

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