Sierra Company allocates the estimated $200,000 of its accounting department cos

Question

Sierra Company allocates the estimated $200,000 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows: Department Employees Accounting 4 Production 36 Sales 12 How much of the accounting department costs will be allocated to the production and sales departments?

Explanation / Answer

Sierra Company allocates the estimated $200,000 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows: Department Employees Accounting 4 Production 36 Sales 12 How much of the accounting department costs will be allocated to the production and sales departments? Production: $150,000 Sales: $50,000

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