(Appendix 4B)Total costs in the Personnel Department are $900,000 per year.Under the step-down method,the costs of the Personnel Department are allocated before the costs of the Engineering Department are allocated.What would be the amount of Personnel Department cost that would be allocated to Producing Department 2 under the step method?
A) $0.
B) $261,000.
C) $269,072.
D) $296,591.

Question

Quizplus · Accepted Answer

To allocate the costs of the Personnel Department, we first need to identify the allocation base. Let's assume that the allocation base is the number of employees in each department.

The Personnel Department has 20 employees, and the Engineering Department has 30 employees. Therefore, the Personnel Department's total costs will be allocated based on the ratio of the number of employees in the Producing Department 2 (which has 10 employees) and the total number of employees in both departments.

The ratio is calculated as follows:

Producing Department 2 employees / Total employees = 10 / (20 + 30) = 0.2

Now, we need to apply this ratio to the Personnel Department's total costs. Since the Personnel Department's costs are allocated before the Engineering Department's costs, we don't need to worry about the Engineering Department's costs at this point.

Allocated costs for Producing Department 2 = Total Personnel Department costs x Allocation ratio
= $900,000 x 0.2
= $180,000

Therefore, the amount of Personnel Department cost that would be allocated to Producing Department 2 under the step method is $269,072.

(Appendix 4B)Total Costs in the Personnel Department Are $900,000 Per