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 $345,000 686,000 53,000 $1184,000 The following information is available concerning various activity measures and service usages by each of the divisions: Division B 48,000 s 422,000 222.000 280 Division A 24,000 Area occupied (square feet) Payroll Computer time (hours) Computer storage (megabytes) Equipment value Operating profit (pre-allocations 260 8,700 $ 263,000 313,000 s 622,500 ising the most appropriate allocation basis, what is the personnel cost allocated to Division A? O $100.258 O $102.078 s837581 O $153,000

Explanation / Answer

Ans. A    100258 *Calculation: Cost Allocation base Allocation Personnel costs Payroll 153000 * 422000 / 644000 100257.8 100258   (rounded) *Allocation to division A = Personnel cost * Payroll of division A / Total payroll of division A and division B

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