The Lots More Store has a Janitorial Department and a Personnel Department that

Question

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments. The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated based on employees. The following information is available.

Using the direct method, calculate the amount of Janitorial Department cost allocated to Sales Department.

The correct answer is: $6000 Why??

Personnel Dept $45 000 4000 Janitorial Dept $30 000 1000 10 Sales #1 Sales #2 Sales #3 Budget Space (sq m) 20 000 30 000 50 000 of Employees5 15 45 30

Explanation / Answer

Janitorial Department cost is allocated based on space

Total space taken by both the departments = 5000sq m

Total janitorial cost = $30,000

Hence, cost allocated to personnel department = 30000/5000*4000 = $24,000

Hence, the baalance is allocated to sales department = $6000

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