Question 2: 15 Marks

The personnel department at Dansford Company has $45,000 in budgeted costs for the coming period. Dansford is trying to determine whether to allocate these costs to the two production departments based on the number of employees or based on machine hours used in the department. Information about the production departments is given below:

Molding Engraving

Number of employees 15 35

Anticipated machine hours 600 400

Instructions:

1. Calculate the costs allocated to each of the production departments using each allocation base. (12 marks)
2. Which allocation base is preferable? (3 marks)