Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: $\begin{array}{lll}
\text { Office Expenses } & \text { Total } & \text { Allocation Basis } \
\text { Salaries } & \$ 30,00 \mathrm{C} & \text { Number of employees } \
\text { Depreciation } & 20,000 & \text { Cost of goods sold } \
\text { Advertising } & 40,000 & \text { Net sales }
\end{array}$ $\begin{array}{lrrr}
\text { Item } &{\text { Drilling }} & \text { Grinding } & \text { Total } \
\text { Number of employees } & 1,000 & 1,500& 2,500 \
\text { Net sales } & \$ 325,000 & \$ 475,000 & \$ 800,000 \
\text { Cost of goods sold } & \$ 75,000& \$ 125,000 & \$ 200,000
\end{array}$ The amount of salaries that should be allocated to Grinding for the current period is:
A) $30,000.
B) $18,000.
C) $15,000.
D) $10,000.
E) $12,500.

Question

Quizplus · Accepted Answer

The salaries are allocated based on the number of employees. Grinding has 1,500 out of 2,500 total employees, so the allocation is $ \frac{1,500}{2,500} \times 30,000 = 18,000 $.

Marks Corporation Has Two Operating Departments, Drilling and Grinding, and an Office