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:
A)$0
B)$294,000
C)$270,000
D)$264,600

Question

Quizplus · Accepted Answer

Under the direct method, only the costs that can be directly traced to the operating department are allocated. In this scenario, the Personnel Department costs are considered indirect and not directly traceable to any of the operating departments. Therefore, the amount of Personnel Department cost allocated to Operating Department 2 would be $0.

Suppose the Company Uses the Direct Method of Allocation