The Dopler Manufacturing Company has two production departments (Assembly and Fi

Question

The Dopler Manufacturing Company has two production departments (Assembly and Finishing) and two service departments (Human Resources and Janitorial). The projected usage of the two service departments is as follows Use of Human Use of Janitorial Human 15% Resources Janitorial Assembly Finishing 10% 50% 40% 30% 55% The budgeted costs in the service departments are: Human Resources, $80,000 and Janitorial, $60,000 Gandolf Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and anticipated long-run monthly usage of staff hours for Operating Departments 1 and 2 follow Dept.1 Dept. 2 Total Short-run usage hours) Long-run usage hours) 51,00074,000 125,000 53,00072,000 125,000 If Gandolf uses dual-cost accounting procedures and variable administrative costs total $370,000, the amount of variable administrative cost to allocate to Department 1 would be: (Do not round your intermediate calculations.)

Explanation / Answer

Since this is variable administrative costs, short run allocations would work.

Allocation percent for Dept 1 = (51000/125000)   = 0.408

Allocated cost    = 0.408*370000 = $150,960 Answer

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