Karen Co. allocates the estimated $188,600 of its accounting department costs to
ID: 2623080 • Letter: K
Question
Karen Co. allocates the estimated $188,600 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:
How much of the accounting department costs will be allocated to the production?
Department Employees Accounting 4 Production 40 Sales 10Explanation / Answer
Production share of costs = employees in production / (total employees)
= 40/(4 + 40 + 10) = 40/54
Total costs attributable to production = 40/54 * total costs = 40/54 * 188600 = 139703.70
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