Lindsey Company has two service departments,Maintenance and Human Resources.Lindsey Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year:
$\begin{array}{llll}&&\text { Human }\
&\text { Maintenlance }&\text { Resources } & \text { Mixing } & \text { Finishing } \
\text { Direct costs } & \$ 50,400 & \$ 35,000 & \$ 42,000 & \$ 70,000 \
\text { Square footage } & 1,600 & 800 & 3,200 & 2,400 \
\text { Number of employees } & 16 & 24 & 40 & 60
\end{array}$
If the direct method is used to allocate service department costs,then the cost allocated from the Human Resources Department to the Finishing Department is ________.
A) $14,000
B) $16,800
C) $21,000
D) $33,600

Question

Quizplus · Accepted Answer

The total number of employees in the production departments is 40 + 60 = 100. The Human Resources Department costs of $35,000 are allocated based on the number of employees. The Finishing Department has 60 employees out of a total of 100 employees in the production departments. Therefore, the cost allocated to the Finishing Department from Human Resources is $35,000 * (60/100) = $21,000.

Lindsey Company Has Two Service Departments,Maintenance and Human Resources If the Direct Method Is Used to Allocate Service Department