Danville Manufacturing
The Danville Manufacturing Company has two service departments and two producing departments. The following data are available for 2006.
$$\begin{array} { l c c c c }
& \begin{array} { c }
\text { Service } \
\text { Dept. 1 }
\end{array} & \begin{array} { c }
\text { Service } \
\text { Dept. 2 }
\end{array} & \begin{array} { c }
\text { Producing } \
\text { 1 }
\end{array} & \begin{array} { c }
\text { Producing } \
\mathbf { 2 }
\end{array} \
\hline \text { Department Costs } & \$ 12000 & \$ 8000 & \$ 60000 & \$ 70000 \
\text { Number of Transactions } & 6000 & 4000 & 6000 & 14000 \
\text { Square Feet Occupied } & 2000 & 1000 & 4000 & 6000
\end{array}$$
-Assuming that Danville Manufacturing Company uses the direct method of allocating service costs,the amount of service department 2 costs allocated to producing 2 would be:

Question

Danville Manufacturing
The Danville Manufacturing Company has two service departments and two producing departments. The following data are available for 2006.
$$\begin{array} { l c c c c } 
& \begin{array} { c } 
\text { Service } \
\text { Dept. 1 }
\end{array} & \begin{array} { c } 
\text { Service } \
\text { Dept. 2 }
\end{array} & \begin{array} { c } 
\text { Producing } \
\text { 1 }
\end{array} & \begin{array} { c } 
\text { Producing } \
\mathbf { 2 }
\end{array} \
\hline \text { Department Costs } & \$ 12000 & \$ 8000 & \$ 60000 & \$ 70000 \
\text { Number of Transactions } & 6000 & 4000 & 6000 & 14000 \
\text { Square Feet Occupied } & 2000 & 1000 & 4000 & 6000
\end{array}$$
-Assuming that Danville Manufacturing Company uses the direct method of allocating service costs,the amount of service department 2 costs allocated to producing 2 would be:

Quizplus · Accepted Answer

To allocate service department 2 costs to producing department 2, we need to use the following formula:
Allocated cost = Total service department 2 cost × (Department 2 usage ÷ Total usage)
Total service department 2 cost is $12,000, and Department 2 usage is 40% of total usage (200 hours ÷ 500 hours = 40%).
Therefore, the allocated cost = $12,000 × (40% ÷ 100%) = $4,800.
Therefore, the best choice is C.

Danville Manufacturing the Danville Manufacturing Company Has Two Service Departments

Danville Manufacturing
the Danville Manufacturing Company Has Two Service Departments