Question

Angelo Tucking is divided into two operating divisions: Perishable Foods and Household Goods. The company allocates...

Angelo Tucking is divided into two operating divisions: Perishable Foods and Household Goods. The company allocates personnel and accounting costs to each operating division. Personnel costs are allocated on the basis of employees. Accounting costs are allocated on the basis of the number of transactions processed. Allocations for the coming year are based on the following data:

Service Departments

Operating Divisions

Personnel

Accounting

Perishable Foods

Household Goods

Overhead costs

$100,000

$205,000

$80,000

$50,000

Number of employees

20

60

60

80

Transactions processed

2,000

200

3,000

5,000

If Angelo uses the direct method to allocate service department costs, what is the total costs (after allocation) reported by the Perishable Foods division (rounded to the nearest thousand)?

$198,000

$200,000

$80,000

$235,000

Business   Accounting   
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Homework Answers

Answer #1
perishable Household
overhead costs 80,000 50,000
personnel 42,857
accounting 76,875
199,732
(slight difference is due to rounding)
answer)
200,000
personnel cost allocation rate
100,000/(60+80)
714.2857
allocated to perishable 714.2857*60
accounting
205,000/8000
25.625
allocated to perishable 25.65*3000
76875
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