Pardee, Inc. allocates engineering costs on the basis of the supervisor's time and administration costs on the basis of the number of employees. The company's accountant determined that engineering provides more services to administration than administration provides to engineering. The following data have been collected: Support Departments Operating Departments
Engineering Administration Assembly Finishing
Direct costs $25,000 $15,000 $200,000 $350,000
Number of employees 15 10 300 450
Engineering supervisor's time 30% 15% 35% 20%
If the direct method is used, the fraction of engineering costs allocated to the finishing department will be:
A)20/55
B)20/100
C)20/70
D)20/85

Question

Quizplus · Accepted Answer

Engineering costs are allocated on the basis of the supervisor's time. The supervisor spends 20% of his time on the finishing department. Therefore, 20% of engineering costs will be allocated to the finishing department.