Tenet Engineering, Inc. operates two user divisions as separate cost objects. To

Question

Tenet Engineering, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred Computer services (85% fixed) Building occupancy Personnel costs Total common costs $327000 656,000 147,000 $1,130,000 The following information is available concerning various activity measures and service usages by each of the divisions: Division A 22,700 $431,000 230 6,450 $ 203,000 $655,000 Division EB 45,400 $ 231,000 250 Area occupied (square feet) Payroll Computer time (hours) Computer storage (megabytes) Equipment value Operating profit (pre-allocations) $ 253,000 $ 595,000 Using the most appropriate allocation basis, what is the personnel cost allocated to Division A? O $95,705 O $97,525 O $147,000 O $79,205

Explanation / Answer

Personnel cost is allocated should be payroll :

Division A cost of personnel cost = 147000*431000/662000 = 95705

so answer is a) $95705

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