Maintenance Department costs of $320,000 are allocated on the basis of budgeted

Question

Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:

-------------------------Matince-------personal-----a-------- --b

Budg cost--------------32000--------80000-----160000-----240000
Budg maint hours------- na----------800----------960----------640

Number of employess ---40-----------na-----------160---------480


Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

Explanation / Answer

I think there is a typo in you data, your problem statement and data dont match. I am assuming maintenance department costs 320,000 not 32,000

Maintenance Department B cost = [320,000 / (960 + 640) ] * 640
Maintenance Department B cost = $128,000....(answer)

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