Question
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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