(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
-Suppose the company uses the direct method of allocation.The amount of Personnel Department cost that would be allocated to Operating Department 2 would be closest to:
A) $0
B) $84,141.50
C) $79,934.43
D) $94,040.50

Question

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
  Costs in the Personnel Department total $168,283 per year.
-Suppose the company uses the direct method of allocation.The amount of Personnel Department cost that would be allocated to Operating Department 2 would be closest to:
A) $0 
B) $84,141.50 
C) $79,934.43 
D) $94,040.50

Quizplus · Accepted Answer

Allocation base for Personnel Department costs = 75 + 95 = 170
Personnel Department cost allocated to the Operating Department 2 = $168,283 × (95/170) = $94,040.50

(Appendix 4B) Anchor Corporation Has Two Service Departments, Personnel and Engineering