Quan Company has three support departments whose direct department costs are $20,000,$30,000,and $40,000,respectively,and two producing departments whose direct department costs are $400,000 and $360,000,respectively.What is the combined total department cost for the producing departments after allocation of the support departments?

Question

Quizplus · Accepted Answer

To allocate the support department costs to the producing departments, we need to use a method of allocation such as the reciprocal method or the step-down method. Without information on the allocation method used, we cannot determine the exact amount of support department costs allocated to each producing department. However, we do know that the total direct department costs of the producing departments is $760,000 ($400,000 + $360,000), so the total department cost for the producing departments after allocation of the support departments should be higher than this amount. The only answer choice that meets this criterion is D, $850,000. Therefore, D is the best choice.

Quan Company Has Three Support Departments Whose Direct Department Costs