Tardes Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing.Maintenance costs are allocated
Based on square footage while personnel costs are allocated based on number of
Employees.The following information has been gathered for the current year: $\begin{array}{lrrrr}&\text { Maintenance}&\text { Personnel}&\text { Mixing }&\text {Finishing }\\hline
\text { Direct dept. costs } & \$ 50,400 & \$ 35,000 & \$ 42,000 & \$ 70,000 \
\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \
\text { Number of employees } & 16 & 24 & 48 & 64
\end{array}$ If the direct method is used to allocate costs, then the amount of overhead allocated from Personnel to Finishing would be _____.
A)$33,600
B)$20,000
C)$16,800
D)$14,147

Question

Quizplus · Accepted Answer

The total number of employees in all departments is 16 (Maintenance) + 24 (Personnel) + 48 (Mixing) + 64 (Finishing) = 152. The Personnel department's costs of $35,000 will be allocated based on the number of employees. The Finishing department has 64 employees out of the total 152 (excluding the Personnel department itself for direct allocation purposes), so the allocation to Finishing is $35,000 \times \frac{64}{152 - 24}$ (since Personnel's employees are not included in the allocation base for its own costs). This simplifies to $35,000 \times \frac{64}{128} = 35,000 \times 0.5 = \$17,500$, which is not an option provided, indicating a mistake in calculation. The correct approach is to allocate based on the proportion of employees, excluding the service department's own employees from the denominator. The correct calculation, considering the mistake, should focus on the options provided, suggesting a misunderstanding in the initial explanation. Given the options and the mistake in the initial calculation, the correct allocation method involves dividing the Personnel department's costs proportionally by the number of employees in the production departments only, which would be $35,000 \times \frac{64}{48 + 64}$ for the correct proportion, leading to the realization that an error was made in the explanation. The correct calculation involves allocating the $35,000 based on the proportion of employees in the Finishing department compared to the total, excluding the service departments correctly. Without the exact calculation provided in the options, the correct answer should reflect the proper allocation method, which involves dividing the Personnel costs among the production departments based on the number of employees, leading to a reevaluation of the options provided.

Tardes Company Has Two Service Departments, Maintenance and Personnel, as Well