Question

Department A had sales of $200,000.00, Department B had sales of $600,000.00, and total overhead expenses were $32,000.00. The allocation of overhead to Department A should be ________.

Answer 1

the allocation of overhead to department A is $8,000.00

Explanation:

Given that Department A had sales of $200,000.00 and Department B had sales of $600,000.00, the ratio of department A's sales to that of department B is 200,000.00 / 600,000.00 = 1/3.

The total overhead expenses were $32,000.00, the allocation of overhead to department A is 32,000.00 / (3 + 1) = $32,000.00 / 4 = $8,000.00