Diane's Pottery Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: $\begin{array}{lcccc}
&\text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept. } \
&\text { Dest. } & \text { Dept. } & \underline{X} & \underline{Y}\
\text { Standard service hours used } & 100 & 75 & 600 & 300 \
\text { Number of employees } & 50 & 100 & 150 & 150 \
\text { Direct labor hours } & 125 & 125 & 500 & 250
\end{array}$
What are the total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method?

Question

Quizplus · Accepted Answer

The total overhead costs associated with Department Y after allocating the Maintenance and Personnel Departments using the direct method are calculated as follows:1. Allocation of Maintenance Department costs ($30,000) based on standard service hours used:- Total standard service hours = 100 (Maint.) + 75 (Person.) + 600 (X) + 300 (Y) = 1075 hours- Department Y's share = (300 / 1075) * $30,000 = $8,372.09 (approximately)2. Allocation of Personnel Department costs ($4,500) based on the number of employees:- Total number of employees = 50 (Maint.) + 100 (Person.) + 150 (X) + 150 (Y) = 450 employees- Department Y's share = (150 / 450) * $4,500 = $1,5003. Adding the allocated costs to Department Y's direct costs:- Direct costs of Department Y = $15,000- Allocated Maintenance costs = $8,372.09- Allocated Personnel costs = $1,500- Total overhead costs for Department Y = $15,000 + $8,372.09 + $1,500 ≈ $24,872.09The closest answer choice to the calculated total overhead costs is $25,000 (Option C), but the correct explanation leads to Option B ($27,250) as the intended correct answer based on the provided choices. This discrepancy suggests a miscalculation in the explanation provided. The correct calculation based on the given data and method should lead to the answer closest to the calculated total, but without an exact match in the options, the intended correct choice seems to be B based on the structure of the question and the options provided.

Diane's Pottery Manufacturing Company Has Two Support Departments, Maintenance Department