Chambers, Inc. has two support departments (utilities and computer)and two operating departments (A and B). The following data are given: Services Provided By
Utilities Computer
Direct costs $55,000 $75,000
Services provided to:
Utilities ---- 15%
Computer 25% ----
Operating department A 35% 55%
Operating department B 40% 30%
If the direct method is used, how much computer cost would be allocated to operating department B?
A)$11,250
B)$25,667
C)$26,471
D)$41,250

Question

Quizplus · Accepted Answer

The direct method allocates costs based on the actual usage of the services provided. In this case, operating department B uses 30% of the computer services. Therefore, the amount of computer cost allocated to operating department B would be $75,000 x 30% = $22,500.