The RAH Manufacturing Company has two service departments: Maintenance and Accou

Question

The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $312,000 are allocated on the basis of machine hours. The Accounting Department's costs of $132,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $312,000 and $512,000, respectively.

What is the Accounting Department's cost allocated to Department B using the DIRECT METHOD?

A) $58,667

B) $73,333

C) $51,333

D) $3,667

The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $312,000 are allocated on the basis of machine hours. The Accounting Department's costs of $132,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $312,000 and $512,000, respectively.

Maint Acctg A B Machine Hours 504 32 2,540 320 Number of employees 14 14 20 16

What is the Accounting Department's cost allocated to Department B using the DIRECT METHOD?

A) $58,667

B) $73,333

C) $51,333

D) $3,667

Explanation / Answer

Allocation of accounting department cost under direct method :

Number of employees = 20+16 = 36

Department A = 132000*20/36 = 73333

Department B = 132000*16/36 = 58667

so answer is a) $58,667

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