(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.
-Assuming that SJM allocates service department costs using the direct method,the total cost allocated from Cafeteria to Mining would be closest to:
A) $21,687
B) $15,750
C) $23,684
D) $22,500

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.
-Assuming that SJM allocates service department costs using the direct method,the total cost allocated from Cafeteria to Mining would be closest to:
A) $21,687 
B) $15,750 
C) $23,684 
D) $22,500

Quizplus · Accepted Answer

Allocation base for Cafeteria costs = 400 + 360 = 760
Cost allocated from Cafeteria to Mining = $45,000 × (400/760) = $23,684

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