Q 1 Fadel, Inc. allocates engineering costs on the basis of the supervisor’s tim

Question

Q 1 Fadel, Inc. allocates engineering costs on the basis of the supervisor’s time and administration costs on the basis of the number of employees.

The following data have been collected:

                                                                    Support Departments           Operating Departments

                                                                  Engineering    Administration    Operating 1       Operating 2

Department costs                       $25,000        $15,000      $200,000      $350,000

Number of employees                        15                 10               300               450

Engineering supervisor’s time   30 hours       15 hours       35 hours       20 hours

Use the direct method to allocate support department costs to the different departments.

Explanation / Answer

se the direct method to allocate support department costs to the different departments.

Engineering Administration Operating 1 Operating 2 Department costs    25000 15000 200000 350000 Allocation of engineering department cost -25000 15909 9091 Allocation of administration department cost -15000 6000 9000 Total cost - - 221909 368091

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