Trucker industries provides the following information about departmental consumption of allocation bases for its 3 support and 2 operating departments. For the direct method, what proportion of the Personnel's costs will be allocated to the Machining Department?
A) 30%
B) 10%
C) 42.9%
D) 14.3%

Question

Trucker industries provides the following information about departmental consumption of allocation bases for its 3 support and 2 operating departments.  For the direct method, what proportion of the Personnel's costs will be allocated to the Machining Department?
A) 30% 
B) 10% 
C) 42.9% 
D) 14.3%

Quizplus · Accepted Answer

To use the direct method, we need to allocate the support department costs to the operating departments using the allocation bases provided. 
Personnel support department cost is allocated based on the number of employees in each operating department. 
Using the allocation rate given for Personnel (total Personnel cost/total number of employees), we can calculate the amount of cost allocated to each department.

Machining Department Personnel cost allocation:
= (20,000 / 46) * 14
= $6,086.96

Total Personnel cost allocated to all operating departments:
= (20,000 / 46) * 46
= $20,000

Proportion of Personnel's costs allocated to Machining Department:
= $6,086.96 / $20,000
= 0.3043 or 30.43%
 
Therefore, the answer is C) 42.9%.

Trucker Industries Provides the Following Information About Departmental Consumption of Allocation