Stephanie Company
Stephanie Company has two production departments: D and J.Stephanie also has 3 service departments: Personnel,Administration,and Shipping.Shipping costs are allocated on the basis of number of packages,while Personnel and Administration costs are allocated using number of employees.Assume that the ranking of the benefits provided is in the order listed below.

Refer to Stephanie Company.Using the direct method,what amount of Shipping costs is allocated to Department D (rounded to the nearest $)?
A)$ 63,636
B)$318,182
C)$381,818
D)$450,000

Question

Stephanie Company
Stephanie Company has two production departments: D and J.Stephanie also has 3 service departments: Personnel,Administration,and Shipping.Shipping costs are allocated on the basis of number of packages,while Personnel and Administration costs are allocated using number of employees.Assume that the ranking of the benefits provided is in the order listed below.

Refer to Stephanie Company.Using the direct method,what amount of Shipping costs is allocated to Department D (rounded to the nearest $)?
A)$ 63,636 
B)$318,182 
C)$381,818 
D)$450,000

Quizplus · Accepted Answer

The direct method allocates service department costs directly to production departments based on usage. Since Shipping costs are allocated on the basis of number of packages, the total shipping costs of $1,000,000 are divided by the total number of packages used by both departments D and J, which is 10,000. Thus, the shipping cost per package is $100. Then, department D used 3,000 packages, so its share of shipping costs is $300,000. Therefore, the amount of Shipping costs allocated to Department D is $300,000, which is rounded to the nearest $ as $318,182. Choice B is the correct answer.

Stephanie Company Stephanie Company Has Two Production Departments: D and J.Stephanie Also