The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $728,850 are allocated on the basis of machine hours. The Accounting Department's costs of $148,800 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $280,000 and $480,000, respectively. Maint Acctg A B Machine hours 495 115 3,000 390 Number of employees 2 2 8 4 What is the Maintenance Department's cost allocated to Department A using the direct method

Question

Rory Tucker

Business

20 September, 05:51

The Hsu Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $728,850 are allocated on the basis of machine hours. The Accounting Department's costs of $148,800 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $280,000 and $480,000, respectively. Maint Acctg A B Machine hours 495 115 3,000 390 Number of employees 2 2 8 4 What is the Maintenance Department's cost allocated to Department A using the direct method

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Answers (1)

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Darius Duran · Answer 1

The correct answer is $645,000.

Explanation:

According to the scenario, the computation of the given data are as follows:

We can calculate the Maintenance Department's cost allocated to Department A using the direct method are as follows:

Cost allocated = Maintenance Department's costs * Machine hours of Dept. A : (Machine hours of Dept. A + Machine hours of Dept. B)

By putting the value, we get

Cost Allocated = $728,850 * 3,000 : (3,000 + 390)

= $728,850 * 3,000 : 3,390

= $645,000