Oaks Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively.
Data on standard service hours and number of employees are as follows:
$\begin{array}{lrrr}
&\text { MD}&\text { PD}&\text { P1}&\text { P2}\
\text { Standard service hours used } & 100 & 50 & 300 &150\
\text { Number of employees } & 10 & 20 & 90&90\\
\text { Direst lahour houre }&50&50&250&250
\end{array}$

-Refer to the figure.Using the sequential method,if the support department with the highest percentage of interdepartmental service is allocated first,what is the cost of the Maintenance Department allocated to Department P1?

Question

Oaks Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively.
Data on standard service hours and number of employees are as follows:
$\begin{array}{lrrr}
&\text { MD}&\text { PD}&\text { P1}&\text { P2}\
\text { Standard service hours used } & 100 & 50 & 300 &150\
\text { Number of employees } & 10 & 20 & 90&90\\
\text { Direst lahour houre }&50&50&250&250
\end{array}$

-Refer to the figure.Using the sequential method,if the support department with the highest percentage of interdepartmental service is allocated first,what is the cost of the Maintenance Department allocated to Department P1?

Quizplus · Accepted Answer

The Maintenance Department (MD) should be allocated first because it has a higher percentage of interdepartmental service (100 hours to MD and PD out of a total of 600 hours, which is higher than the PD's interdepartmental service of 30 employees out of a total of 200 employees). The allocation to P1 is based on the proportion of standard service hours used by P1 to the total service hours used by all departments excluding MD itself (since it's being allocated first). P1 uses 300 out of 500 total service hours (excluding the 100 hours used by MD), which is 60%. Therefore, $30,000 * 60% = $18,000 is allocated to P1.

Oaks Company Has Two Support Departments, Maintenance Department (MD) and Personnel