It has been determined that Administrative costs of $6,300 have been consumed on a percentage basis by the following departments: Using the direct method, how much of the administrative costs will be allocated to the Engineering department (rounded)?
A)$5,040
B) $1,890
C) $2,363
D) $3,938

Question

It has been determined that Administrative costs of $6,300 have been consumed on a percentage basis by the following departments:  Using the direct method, how much of the administrative costs will be allocated to the Engineering department (rounded)? 
A)$5,040 
B) $1,890 
C) $2,363 
D) $3,938

Quizplus · Accepted Answer

The direct method allocates costs based on actual usage by each department. Therefore, we need to know the percentage of administrative costs consumed by the Engineering department.

The percentage consumed by the Engineering department is given as 38% (100% - 22% - 40%).

To allocate the administrative costs to the Engineering department, we need to multiply the total administrative costs by the percentage consumed:

$6,300 x 38% = $2,394

Rounded to the nearest dollar, this gives us $2,363, which is answer choice C.

It Has Been Determined That Administrative Costs of $6,300 Have