Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.

If administrative expense of $77,500 is allocated on the basis of number of employees, the amount allocated to the Car Rental Department would be ________.
A) $38,750.00
B) $52,364.86
C) $25,135.14
D) $51,278.20

Question

Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.

If administrative expense of $77,500 is allocated on the basis of number of employees, the amount allocated to the Car Rental Department would be ________.
A) $38,750.00 
B) $52,364.86 
C) $25,135.14 
D) $51,278.20

Quizplus · Accepted Answer

The amount allocated to the Car Rental Department
= $77,500 × [125 ÷ (125 + 60)] =$52,364.86

Stark Corporation Has Two Departments, Car Rental and Truck Rental