30. The Dopler Manufacturing Company has two production departments (Assembly an

Question

30.

The Dopler Manufacturing Company has two production departments (Assembly and Finishing) and two service departments (Human Resources and Janitorial). The projected usage of the two service departments is as follows:

  
The budgeted costs in the service departments are: Human Resources, $80,000 and Janitorial, $60,000.

Gandolf Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run monthly usage of staff hours for Operating Departments 1 and 2 follow.

  
If Gandolf uses dual-cost accounting procedures and variable administrative costs total $330,000, the amount of variable administrative cost to allocate to Department 1 would be: (Do not round your intermediate calculations.)

Multiple Choice

$135,000.

$116,000.

$155,000.

$132,000.

None of these.

Use of Use of Human Resources Janitorial   Human Resources 15%           Janitorial 10%           Assembly 50%         30%           Finishing 40%         55%        

Explanation / Answer

Answer is $135,000 Explanation: Variable admin cost of $330,000 shall be apportioned among department in ratio of short run usage Short run usage: Ddept 1 54000 Deptt 2: 78000 Total Short run usage 132000 Therefore, Share of Deptt 1: $330,000 *54000/132000 = $135,000

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