Realty Company allocates common Building Department costs to producing departments (A and and B) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows: If Realty Company uses the direct allocation method, the ratio representing the portion of Personnel costs allocated to Department A is:
A) 40/83
B) 75/83
C) 45/75
D) None of the above

Question

Realty Company allocates common Building Department costs to producing departments (A and and B) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows:  If Realty Company uses the direct allocation method, the ratio representing the portion of Personnel costs allocated to Department A is:
A) 40/83 
B) 75/83 
C) 45/75 
D) None of the above

Quizplus · Accepted Answer

When using the direct method, only the data related to the allocation base for the producing departments are used. Personnel Department costs are allocated based on number of employee in the producing departments (45 in A, and 30 in B); therefore, the ratio of A employees to the total employees in producing departments is 45/75.

Realty Company Allocates Common Building Department Costs to Producing Departments