(Appendix 4B)Assume that the company uses the direct method of allocating Service Department costs to Operating Departments.How much Building & Grounds cost would be allocated to Operating Department A?
A) $20,903.
B) $21,600.
C) $24,000.
D) $29,700.

Question

Quizplus · Accepted Answer

Using the direct method, the Building & Grounds cost would be allocated based on the percentage of floor space used by each operating department.

Operating Department A uses 30% of the total floor space (3,000 ÷ 10,000).

Therefore, Building & Grounds cost allocated to Operating Department A would be: 
$80,000 x 30% = $24,000

Therefore, the correct answer is C, $24,000.

(Appendix 4B)Assume That the Company Uses the Direct Method of Allocating