Figure 7-6 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:

- Refer to Figure 7-6.Using the direct method, the cost of the Maintenance Department allocated to Department P1 is

Question

Figure 7-6 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:

- Refer to Figure 7-6.Using the direct method, the cost of the Maintenance Department allocated to Department P1 is

Quizplus · Accepted Answer

The direct method allocates service department costs directly to production departments based on a specific allocation base. If the Maintenance Department's total cost is $20,000 and it is allocated entirely to Department P1, then the cost allocated to P1 is $20,000.

Figure 7-6 Oaks Company Has Two Support Departments, Maintenance Department