The fixed costs of Baxter Company's personnel department are allocated to operating departments on the basis of direct labor-hours.The following data have been provided: The fixed costs of the personnel department are budgeted at $56,000 per year and are incurred in order to support long-run average requirements.How much of this fixed cost should be charged to Operating Department X at the end of the year for performance evaluation purposes?
A)$35,000
B)$33,600
C)$52,500
D)$22,400

Question

The fixed costs of Baxter Company's personnel department are allocated to operating departments on the basis of direct labor-hours.The following data have been provided:  The fixed costs of the personnel department are budgeted at $56,000 per year and are incurred in order to support long-run average requirements.How much of this fixed cost should be charged to Operating Department X at the end of the year for performance evaluation purposes?
A)$35,000 
B)$33,600 
C)$52,500 
D)$22,400

Quizplus · Accepted Answer

Percentage of long-run average requirements for Operating Department X
= 15,000 DLHs/(15,000 DLHs + 10,000 DLHs)= 60%
Fixed cost of personnel department allocated to Operating Department X
= 60% F1F1F1S1F1F1F10 $56,000 = $33,600

The Fixed Costs of Baxter Company's Personnel Department Are Allocated