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Alliance Ltd. has two support departments (Materials Handling, Maintenance) and two operating departments (Machining, Assembly). The assistant accountant has already calculated the support department costs

Alliance Ltd. has two support departments (Materials Handling, Maintenance) and two operating departments (Machining, Assembly). The assistant accountant has already calculated the support department costs using reciprocal support cost allocation method, which are $45,000 for Materials Handling and $30,000 for Maintenance. The remaining step is to allocate the support department costs to the operating departments.

Support departments

Operating

Cost allocation basis and usage:

Materials handling

Maintenance

Machining

Assembly

Materials handling (no. of employees)

3

2

12

8

Maintenance (machine hours)

10,000

2,500

5,000

35,000

Based on the above information, the Maintenance cost allocated to Assembly is:

a.

$43,750

b.

$21,000

c.

$21,875

d.

$10,000

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