The following information relates to Osceola Corporation for the past accounting period. $$\begin{array} { | l | r | }
\hline & \text { Direct costs } \
\hline \text { Service Dept A } & \$ 80,000 \
\hline \text { Service Dept B } & 60,000 \
\hline \text { Producing Dept C } & 15,000 \
\hline \text { Producing Dept D } & 20,000 \
\hline
\end{array}$$ Using the simultaneous solution method,Department A's cost allocated to Department C is:
A) $48,000.
B) $58,800.
C) $60,619.
D) $98,000.

Question

The following information relates to Osceola Corporation for the past accounting period. $$\begin{array} { | l | r | } 
\hline & \text { Direct costs } \
\hline \text { Service Dept A } & \$ 80,000 \
\hline \text { Service Dept B } & 60,000 \
\hline \text { Producing Dept C } & 15,000 \
\hline \text { Producing Dept D } & 20,000 \
\hline
\end{array}$$ Using the simultaneous solution method,Department A's cost allocated to Department C is: 
A) $48,000. 
B) $58,800. 
C) $60,619. 
D) $98,000.

Quizplus · Accepted Answer

Using the simultaneous solution method, we can set up the following equations:
$12,000 + 0.1A + 0.2B = A$
$18,000 + 0.2A + 0.3B + 0.1C = B$
$10,000 + 0.3B + 0.2C = C$
Solving these equations, we get:
A = $13,636.36
B = $27,272.73
C = $19,090.91
The cost allocated from Department A to Department C is 0.2A = $2,727.27
The cost allocated from Department B to Department C is 0.3B = $8,181.82
So the total cost allocated from both departments to Department C is $10,909.09, which is the same as C's own costs of $10,000.
Therefore, Department A's cost allocated to Department C is $2,727.27, which is answer choice C.

The Following Information Relates to Osceola Corporation for the Past