(Appendix 4B) Prestwich Corporation has two service departments and two operating departments. Costs of the Building and Grounds service department are allocated to other departments on the basis of square feet of space occupied. The departments in the company and the amount of space occupied by each are presented below:
Budgeted costs in the Building and Grounds department total $34,800 for the year.
-The amount of Building and Grounds department cost allocated to Operating Department A under the direct method would be:
A) $0
B) $11,600
C) $12,000
D) $13,920

Question

(Appendix 4B) Prestwich Corporation has two service departments and two operating departments. Costs of the Building and Grounds service department are allocated to other departments on the basis of square feet of space occupied. The departments in the company and the amount of space occupied by each are presented below:
  Budgeted costs in the Building and Grounds department total $34,800 for the year.
-The amount of Building and Grounds department cost allocated to Operating Department A under the direct method would be:
A) $0 
B) $11,600 
C) $12,000 
D) $13,920

Quizplus · Accepted Answer

Allocation base = 20,000 + 30,000 = 50,000
Building and Grounds costs allocated to Operating Department A = $34,800 × (20,000/50,000) = $13,920

(Appendix 4B) Prestwich Corporation Has Two Service Departments and Two