City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The operating income for each for the departments is as follows: Annual inspections department $10,000; Emergency services department $50,000; Roads department $40,000 If City Inspections allocates shared payroll costs using operating income as the allocation base, how much of the payroll costs will be allocated to each department?

Question

Quizplus · Accepted Answer

The total operating income is $100,000 ($10,000 + $50,000 + $40,000). The allocation for each department is based on their share of the total operating income. Annual inspections: $10,000/$100,000 = 10%, so $10,000 * 10% = $1,000. Emergency services: $50,000/$100,000 = 50%, so $10,000 * 50% = $5,000. Roads: $40,000/$100,000 = 40%, so $10,000 * 40% = $4,000.

City Inspections Has Three Departments Using the Services of the Payroll