Question

Sasha Company allocates the estimated $195,300 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows: Department Employees Accounting 4 Production 39 Sales 16 How much of the accounting department costs will be allocated to the production?

Answer 1

The Amount of Accounting Department cost to be allocated among the production and sales department = $195,300

Total number of departmental employees in Production and sales

= 39 Employees in Production + 16 Employees in sales

= 55 Employees

Therefore, The amount of accounting department costs to be allocated to the production department

= Total Accounting Department cost x [Number of employees in production department / Total Employees]

= $195,300 x [39/55]

= $1,38,485

“Hence, The amount of accounting department costs to be allocated to the production department = $1,38,485”