The James Corporation has four departments with data as follows: Maintenance Department costs are allocated on the basis of labor hours. The amount of cost allocated to Milling from Maintenance under the direct method would be:
A) $5,600
B) $6,720
C) $5,250
D) $5,700

Question

The James Corporation has four departments with data as follows:  Maintenance Department costs are allocated on the basis of labor hours. The amount of cost allocated to Milling from Maintenance under the direct method would be:
A) $5,600 
B) $6,720 
C) $5,250 
D) $5,700

Quizplus · Accepted Answer

The direct method of allocating Maintenance Department cost to Milling Department is by using the labor hours used by Milling Department. According to the data given, Milling Department used 1,500 labor hours out of the total 3,750 labor hours used by all departments. Therefore, the amount allocated to Milling Department is:
(1,500/3,750) x $13,125 (total Maintenance cost) = $5,250. Thus, choice C is the correct answer.

The James Corporation Has Four Departments with Data as Follows