(Appendix 4B)Boa Corp.uses the direct method to allocate service department overhead costs to operating departments.Information for the month of June follows: What would be the amount of maintenance department costs allocated to Operating Department A for June?
A) $8,000.
B) $8,800.
C) $10,000.
D) $20,000.

Question

Quizplus · Accepted Answer

To allocate maintenance department costs to Operating Department A, we need to use the direct method formula:
Allocated maintenance department costs = Maintenance department costs × Maintenance department usage percentage of Operating Department A

Maintenance department costs for June are $10,000, and Maintenance department usage percentages for Operating Department A are 40% (from the table).
 
Allocated maintenance department costs = $10,000 × 40% = $4,000

Therefore, the amount of maintenance department costs allocated to Operating Department A is $10,000 + $4,000 = $14,000.