1. You are required to allocate the support department cost to operations department by taking any Saudi based operating company. (3 Points)

Answer:

Safwan company has two service departments (personal and Financial) that provide services for one another as well as for two production departments, assembly and finishing. Data for the month are follows:

	Personal	Financial	Assembly	Finishing
Employees	6	8	20	15
Payroll	$15,000	$14,000	$30,000	$27,000

Personnel department costs were $86,000, and financial department costs were $41,000. Safwan uses employees as the allocation base for personnel department costs and payroll costs for financial department costs.

The accounting department allocate the support department cost to production department using the direct method as follows:

	Personal	Financial	Assembly	Financing
Costs	$ 86,000	$ 41,000
Allocate personal	-86,000		$49,143	$36,857
Allocate Financial		-41,000	$ 21,579	$ 19,421
	0	0	$ 21,579	$ 19,421