A company uses charging rates to allocate service department costs to the using departments.
The accountant compiled the following information on one of the service departments:
Budgeted variable costs ..... $238,000
Budgeted fixed costs ..... $ 35,000
Budgeted labor hours ..... 14,000
If Department K plans to use 1,350 hours of the service department’s service in the coming year, how much of the service department’s cost is allocated to Department K?
a. $3,375
b. $27,300
c. $26,325
d. $23,950