In the first step of the allocation, the amount of Administration Department cost allocated to the Assembly Department is closest to:
A)$19,823
B)$17,214
C)$18,690
D)$12,384

Question

Quizplus · Accepted Answer

The amount of Administration Department cost allocated to the Assembly Department can be calculated using the allocation base (direct labor hours) and the allocation rate. The allocation rate is calculated by dividing the total Administration Department cost by the total direct labor hours.

Allocation rate = Total Administration Department cost / Total direct labor hours 
= ($350,000 + $500,000) / (15,000 + 25,000) 
= $850,000 / 40,000 
= $21.25 per direct labor hour

The Assembly Department has 880 direct labor hours, so the amount of Administration Department cost allocated to this department is:

Administration Department cost allocated to Assembly Department = Direct labor hours in Assembly Department x Allocation rate 
= 880 x $21.25 
= $18,700 (rounded to the nearest whole dollar)

Therefore, the closest option is choice C ($18,690).

In the First Step of the Allocation, the Amount of Administration