Franca Corporation has two service departments, Administrative and Facilities, and two operating departments, Assembly and Customer Feedbacks. The company uses the direct method to allocate service department costs to operating departments. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied.
-The total amount of Administrative Department cost allocated to the Assembly Department is closest to:

Question

Franca Corporation has two service departments, Administrative and Facilities, and two operating departments, Assembly and Customer Feedbacks.  The company uses the direct method to allocate service department costs to operating departments. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied.
-The total amount of Administrative Department cost allocated to the Assembly Department is closest to:

Quizplus · Accepted Answer

To allocate the Administrative Department cost to the operating departments, we need to follow these steps:

Step 1: Calculate the cost allocation rate for the Administrative Department.
To do this, we need to divide the total cost of the Administrative Department by the total number of employee hours:
$342,000 / 9,000 hours = $38 per hour

Step 2: Allocate the Administrative Department cost to the operating departments.
To allocate the Administrative Department cost to the Assembly Department, we need to multiply the number of employee hours used by the Assembly Department by the cost allocation rate:
760 hours x $38 per hour = $28,880

Step 3: Calculate the net cost of the Assembly Department.
To calculate the net cost of the Assembly Department, we need to subtract the allocated Administrative Department cost from the total cost of the Assembly Department:
$502,500 - $28,880 = $473,620

Therefore, the closest amount of Administrative Department cost allocated to the Assembly Department is $28,830 (rounded to the nearest dollar).

Franca Corporation Has Two Service Departments, Administrative and Facilities, and Two