Lyle 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: $$\begin{array} { l l l l l }
\text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \
\text { Direct dept.costs } & \$ 126,000 & \$ 105,000& \$ 175,000&\$84,000 \
\text { Square footage } & 800&400&1,600&1,200 \
\text { Number of employees } &8&12&24&32
\end{array}$$ If the direct method is used to allocate costs, then the total cost of the Mixing Department after allocation would be:
A) $72,000
B) $36,143
C) $105,000
D) $213,000

Question

Lyle 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: $$\begin{array} { l l l l l } 
\text { Maintenance } & & \text { Personnel } & \text { Mixing } & \text { Finishing } \
\text { Direct dept.costs } & \$ 126,000 & \$ 105,000& \$ 175,000&\$84,000 \
\text { Square footage } & 800&400&1,600&1,200 \
\text { Number of employees } &8&12&24&32
\end{array}$$ If the direct method is used to allocate costs, then the total cost of the Mixing Department after allocation would be:
A) $72,000
B) $36,143
C) $105,000
D) $213,000

Quizplus · Accepted Answer

The Mixing Department's total cost after allocation includes its direct costs plus allocated costs from Maintenance and Personnel. Maintenance costs are allocated based on square footage: (1600/4000) * $126,000 = $50,400. Personnel costs are allocated based on the number of employees: (24/76) * $105,000 = $33,158. Adding these to the direct costs of $175,000 gives a total of $258,558.

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