Licorice, Inc., has two producing departments, P1 and P2, and two support departments, A and B. Department A serves Departments P1 and P2 in the percentages 45 percent and 55 percent. Department B serves Departments A, P1, and P2 in the percentages 15 percent, 55 percent, and 30 percent. Direct department costs for P1, P2, A, and B are $90,000, $84,000, $15,000, and $10,000, respectively. Compute the total costs to be allocated from Department A.

Question

Quizplus · Accepted Answer

The total costs to be allocated from Department A include its direct costs and the portion of Department B's costs allocated to it. Department A's direct costs are $15,000. Department B allocates 15% of its $10,000 costs to Department A, which is $1,500. Therefore, the total costs to be allocated from Department A are $15,000 + $1,500 = $16,500.