The following information pertains to Famous Company: Famous Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

Question

The following information pertains to Famous Company:  Famous Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

Quizplus · Accepted Answer

The question specifies that maintenance costs are allocated based on machine hours, and does not provide any information on the number of employees or direct labor hours in the Assembly Department. Therefore, we can only use the allocation based on machine hours to determine the maintenance costs allocated to the Assembly Department. The question does not provide the total number of machine hours, so we cannot calculate the predetermined overhead rate based on machine hours. Therefore, we cannot determine the exact amount of maintenance costs allocated to the Assembly Department using the direct method. However, we can eliminate options A, B, and D because they are based on assumptions that are not provided in the question. Therefore, the best choice is C, which is the only option that does not rely on any assumptions beyond the information provided in the question.

The Following Information Pertains to Famous Company: Famous Company