Sales Smart allocates indirect labour costs to its two departments, F and M using number of employees per department as the cost driver. For the current year the number of employees in department F are estimated to be 80 and for M department 45 and total indirect labour costs for the departments are budgeted at $2,400,000. The amount allocated to the departments are:
A) F $1,536,000: M $864,000
B) F$800,000: M $1,600,000
C) F $1,920,000: M $1,080,000
D) F $1,600,000: M $800,000

Question

Quizplus · Accepted Answer

The allocation is based on the number of employees. Department F has 80 employees and M has 45, totaling 125 employees. The cost per employee is $2,400,000 / 125 = $19,200. Therefore, F is allocated 80 * $19,200 = $1,536,000 and M is allocated 45 * $19,200 = $864,000.

Sales Smart Allocates Indirect Labour Costs to Its Two Departments