Palace Company has two service departments and two user departments.The number of employees in each department is:
$$\begin{array} { | l | r | }
\hline \text { Personnel } & 10 \
\hline \text { Cateteria } & 25 \
\hline \text { Producing Department A } & 265 \
\hline \text { Producing Department B } & \underline { 250 } \
\hline & 560 \
\hline
\end{array}$$The fixed costs of the Personnel Department are allocated on a basis of the number of employees.If these costs are budgeted at $37,125 during a given period,the amount of cost allocated to the Cafeteria under the step method would be:
A) $0.
B) $1,718.75.
C) $1,687.50.
D) $1,802.18.

Question

Palace Company has two service departments and two user departments.The number of employees in each department is: 
$$\begin{array} { | l | r | } 
\hline \text { Personnel } & 10 \
\hline \text { Cateteria } & 25 \
\hline \text { Producing Department A } & 265 \
\hline \text { Producing Department B } & \underline { 250 } \
\hline & 560 \
\hline
\end{array}$$The fixed costs of the Personnel Department are allocated on a basis of the number of employees.If these costs are budgeted at $37,125 during a given period,the amount of cost allocated to the Cafeteria under the step method would be:
A) $0.
B) $1,718.75.
C) $1,687.50.
D) $1,802.18.

Quizplus · Accepted Answer

The Personnel Department's fixed costs are allocated based on the number of employees. The Cafeteria has 25 employees, which is 25/560 or 4.46% of the total employees. Therefore, the amount of cost allocated to the Cafeteria under the step method would be $37,125 x 4.46% = $1,687.50.

Palace Company Has Two Service Departments and Two User Departments