Koreen Manufacturing Co. has three production departments. Koreen allocates main

Question

Koreen Manufacturing Co. has three production departments. Koreen allocates
maintenance costs to the departments based on their use of machine hours. The
maintenance cost for March was $180,000. The departments usage of labor
and machine hours in March were:
Department Machine hours Labor hours
A 500 3,000
B 500 5,000
C 800 2,000
How much maintenance cost should be allocated to the department B for March?
A) $50,000
B) $90,000
C) $60,000
D) $64,285
31) The overriding concern in forming a cost pool is to ensure that:
A) There is an appropriate amount of Chlorine in the pool.
B) All sunk costs are assigned to the pool.
C) Only costs which have been budgeted are included in the cost pool.
D) The costs in the pool are homogeneous or similar.

Explanation / Answer

180,000/(500+500+800) = $100 per machine hour Dept B: 100*500 = $50,000 Answer: A, $50,000. 31) Answer: The costs in the pool are homogenous or similar

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