Question

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:

	Support Departments		Production Departments
	Maintenance Department	Personnel Department	A	B
Budgeted costs	$160,000	$40,000	$80,000	$120,000
Budgeted maintenance-hours	NA	400	480	320
Number of employees	20	NA	80	240

Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

$48,000

$64,000

$78,000

$96,000

Answer 1

	Department	Sum of Percentage	A	B
	Maintainance	480+320=800	480/800	320/800
	Personnel	80+240=320	80/320	240/320
	Department	A	B	Maintainance	Personnel
	Allocated OH	80000	120000	160000	40000
	Dept Maintaince Reallocation	96000	64000	-160000
	Dept Personel Reallocation	10000	30000		-40000
	Total	186000	214000
	Total Allocation of Maintainance Department Cost to Department B:
	From Above Table i.e 160000*320/800
	Total Allocation is 64000/-
	Answer is B