Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively.
Data on standard service hours and number of employees are as follows:

-Refer to Figure 7-6. Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the support departments allocated to Department P1 is

Question

Figure 7-6
Golden Leaves Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of $30,000 are allocated on the basis of standard service used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $9,000 and $15,000, respectively.
Data on standard service hours and number of employees are as follows:
 
-Refer to Figure 7-6. Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the support departments allocated to Department P1 is

Quizplus · Accepted Answer

First, we need to determine the percentage of interdepartmental service for each support department:
- Maintenance Department: $30,000 / 4,500 standard service hours = $6.67 per standard service hour
- Personnel Department: $4,500 / 15 employees = $300 per employee

Next, we allocate the support department costs using the sequential method. Since Maintenance Department has the highest percentage of interdepartmental service (60%), we allocate its costs first.

Allocation of Maintenance Department costs:
- P1: 1,500 service hours x $6.67 = $10,005
- P2: 2,000 service hours x $6.67 = $13,340

Allocation of Personnel Department costs:
- P1: 5 employees x $300 = $1,500
- P2: 10 employees x $300 = $3,000

Finally, we allocate the direct costs of each producing department:
- P1: $9,000 + $10,005 + $1,500 = $20,505
- P2: $15,000 + $13,340 + $3,000 = $31,340

Therefore, the cost of the support departments allocated to Department P1 is $10,005 + $1,500 = $11,505. However, we also need to add the direct cost of Department P1, which gives us a total cost of $20,505. Therefore, the correct answer is choice C.

Figure 7-6 Golden Leaves Company Has Two Support Departments, Maintenance Department (MD)