Buenos 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: $$\begin{array} { l l l l l }
\text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \
\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \
\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \
\text { Number of employees } 16 & 24 & 48 & 64
\end{array}$$ If the direct method is used to allocate costs, then the amount of overhead allocated from Personnel to Finishing would be:
A) $16,800
B) $14,147
C) $33,600
D) $19,200

Question

Buenos 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: $$\begin{array} { l l l l l } 
\text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \
\text { Direct dept.costs } & \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \
\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \
\text { Number of employees } 16 & 24 & 48 & 64
\end{array}$$ If the direct method is used to allocate costs, then the amount of overhead allocated from Personnel to Finishing would be:
A) $16,800
B) $14,147
C) $33,600
D) $19,200

Quizplus · Accepted Answer

The Personnel department costs are allocated based on the number of employees. The total number of employees is 16 (Maintenance) + 24 (Personnel) + 48 (Mixing) + 64 (Finishing) = 152. The proportion for Finishing is 64/152. Therefore, the allocation from Personnel to Finishing is $33,600 * (64/152) = $14,147.37, which rounds to $14,147.

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