Sasha Company allocates the estimated $189,200 of its accounting departments cos

Question

Sasha Company allocates the estimated $189,200 of its accounting departments 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 on the number of employees using the direct method. Information regarding costs and employees follows:

Department                                                                    Employees

Accounting                                                                              4

Production                                                                                26

Sales                                                                                            12

How much of the accounting department costs will be allocated to the production?

Explanation / Answer

Total cost that has toallocated is $ 189,200, Using the direct method the cost will be divided between the total number of employees. Total employees are 42, the production department has total 26 employees:

The cost will be calculated as follows:

26/ (4+ 26 + 12) x $189,200 = $ 117,124

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