Alleluia Company has two service departments,Maintenance and Personnel.Alleluia Company also has 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: If the direct method is used to allocate service department costs,then the cost allocated from the Maintenance Department to the Mixing Department is ________.

Question

Alleluia Company has two service departments,Maintenance and Personnel.Alleluia Company also has 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:  If the direct method is used to allocate service department costs,then the cost allocated from the Maintenance Department to the Mixing Department is ________.

Quizplus · Accepted Answer

The direct method allocates service department costs directly to the production departments without any allocation to the other service department. Thus, the total maintenance cost of $72,000 will be allocated to the production departments based on square footage.

The Mixing department occupies 30% of the total square footage of the factory. Therefore, the Maintenance cost allocated to the Mixing department is:

$72,000 x 30% = $21,600

Hence the answer is $28,800.

Alleluia Company Has Two Service Departments,Maintenance and Personnel