Jake’s Battery Company has two service departments, Maintenance and Personnel. M
ID: 2536090 • Letter: J
Question
Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Support Departments
Production Departments
Maintenance Department
Personnel Department
A
B
Budgeted costs
$160,000
$40,000
$80,000
$120,000
Budgeted maintenance-hours
NA
400
480
320
Number of employees
20
NA
80
240
Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?
Support Departments
Production Departments
Maintenance Department
Personnel Department
A
B
Budgeted costs
$160,000
$40,000
$80,000
$120,000
Budgeted maintenance-hours
NA
400
480
320
Number of employees
20
NA
80
240
Explanation / Answer
Department Sum of Percentage A B Maintainance 480+320=800 480/800 320/800 Personnel 80+240=320 80/320 240/320 Department A B Maintainance Personnel Allocated OH 80000 120000 160000 40000 Dept Maintaince Reallocation 96000 64000 -160000 Dept Personel Reallocation 10000 30000 -40000 Total 186000 214000 Total Allocation of Maintainance Department Cost to Department B: From Above Table i.e 160000*320/800 Total Allocation is 64000/- Answer is B
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