Astoria Savings & Loans of New York has three revenue-generating departments: Consumer accounts, Commercial accounts, and Loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below: How much cost would be allocated to the Commercial account area from administration using the direct method?

Question

Astoria Savings & Loans of New York has three revenue-generating departments: Consumer accounts, Commercial accounts, and Loans. The bank also has three service areas: administration, personnel, and accounting. The direct costs per month and the interdepartmental service structure are shown below:  How much cost would be allocated to the Commercial account area from administration using the direct method?

Quizplus · Accepted Answer

According to the direct method of cost allocation, the total cost of administration ($50,000) will be directly allocated to the three revenue-generating departments without any apportionment. Therefore, the cost allocated to the Commercial account area from administration would be $10,000 ($50,000/5).

Astoria Savings & Loans of New York Has Three Revenue-Generating