Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are
Question:
Joe's Tire Company has two support departments, Personnel and Maintenance. The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $20,000 are allocated based on the number of employees. Costs of Departments A and B are $40,000 and $60,000, respectively.
Data on standard service hours and number of employees are as follows:
| Maintenance | Personnel | Production Dept. A | Production Dept. B |
Standard service hours used | 200 | 200 | 240 | 160 |
Number of employees | 10 | 20 | 40 | 120 |
How much of the cost of the Personnel Department is allocated to Department B using the direct method?
a) $12,632
b) $15,000
c) $48,000
d) $8,000
e) $13,333
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen