Question

A company has 5 departments; M and N (both operating) and R, S and T (all three supporting). They render the following units to other departments:

R:	to S - 300 w.u.		S:	to M - 200 w.u.		T:	to S - 150 w.u.
	to M - 350 w.u.			to N - 200 w.u.			to M - 100 w.u.
	to N - 150 w.u.						to N - 150 w.u.

The primary indirect cost allocation is as follows: M = €200; N = €300; R= €50; S= €70; T= €40. What is the total secondary allocation that department S is transferring to other departments? (use 3 decimals in your operations)?

Select one:

a. €103.75

b. €283.75

c. €85

d. €70

ASAP PLEASE

Answer 1

Option A

Primary costs	Amount
M	200
N	300
R	50
S	70
T	40

S receives cost from department R and T

Secondary cost to be allocated by S	Amount
Primary allocation	70
Received from R	18.75
Received from T	15
Total	103.75

working
Cost allocated by R	W.u	Percentage	Cost Allocation to other departments	Calculation
S	300	37.50%	18.75	50*37.5%
M	350	43.75%	21.875	50*43.75%
N	150	18.75%	9.375	50*18.75%
Total	800		50

Cost allocated by T	W.u	Percentage	Cost Allocation	Calculation
S	150	37.50%	15	40*37.5%
M	100	25.00%	10	40*25%
N	150	37.50%	15	40*37.5%
Total	400		40