The following information pertains to Famous Company: Famous Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

Question

The following information pertains to Famous Company:  Famous Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

Quizplus · Accepted Answer

Maintenance costs are allocated based on machine hours. The question doesn't provide the number of machine hours used by the Assembly Department, so we cannot calculate the exact amount of maintenance costs allocated to that department. Therefore, we can only use the given options to determine the best choice. The direct method allocates maintenance costs based on machine hours, and option C ($28,800) is the only option that uses the direct method. Therefore, the best choice is C.

The Following Information Pertains to Famous Company: Famous Company