Sasha Company allocates the estimated $196,400 of its accounting departments cos

Question

Sasha Company allocates the estimated $196,400 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----------------------------------------------------------------------37

Sales-----------------------------------------------------------------------------14

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

Explanation / Answer

=$196400*37/(37+14)=$196400*37/51=$142486.27

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