Carson Corporation Carson Corporation has three production departments A,B,and C Carson Corporation also has two service departments,Administration and Personnel.Administration costs are allocated based on value of assets employed,and Personnel costs are allocated based on number of employees.Assume that Administration provides more service to the other departments than does the Personnel Department. Refer to Carson Corporation.Using the step method,what amount of Administration costs is allocated to A (round to the nearest dollar)?
A)$72,973
B)$291,892
C)$145,946
D)$389,189

Question

Carson Corporation Carson Corporation has three production departments A,B,and C Carson Corporation also has two service departments,Administration and Personnel.Administration costs are allocated based on value of assets employed,and Personnel costs are allocated based on number of employees.Assume that Administration provides more service to the other departments than does the Personnel Department.  Refer to Carson Corporation.Using the step method,what amount of Administration costs is allocated to A (round to the nearest dollar)?
A)$72,973 
B)$291,892 
C)$145,946 
D)$389,189

Quizplus · Accepted Answer

The step method first allocates the Administration costs to the service departments. Since Administration provides more service, it is allocated fully to itself first. This means that the total Administration cost of $437,674 is allocated to Administration. Next, Personnel cost is allocated to the production departments based on the number of employees. Based on the information given, we know that A has 30 employees, B has 60 employees, and C has 40 employees, for a total of 130 employees. Therefore, the Personnel cost allocated to A is (30/130) x $72,208 (the total Personnel cost) = $16,693. Finally, the Administration cost is allocated to the production departments based on the value of assets employed. Based on the information given, we know that A has assets valued at $500,000, B has assets valued at $1,000,000, and C has assets valued at $1,500,000, for a total of $3,000,000 in assets. Therefore, the Administration cost allocated to A is (500,000/3,000,000) x $437,674 (the total Administration cost) = $72,946, rounded to the nearest dollar. Therefore, the best choice is C.

Carson Corporation Carson Corporation Has Three Production Departments A,B,and C