Question

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:

Office Expenses Total Allocation Basis
Salaries $ 30,000 Number of employees
Depreciation 20,000 Cost of goods sold
Advertising 40,000 Net sales
Item Drilling Grinding Total
Number of employees 1,000 1,500 2,500
Net sales $ 325,000 $ 475,000 $ 800,000
Cost of goods sold $ 75,000 $ 125,000 $ 200,000
a. The amount of salaries that should be allocated to Grinding for the current period is:
Multiple Choice:
1. $30,000.
2. $18,000.
3. $15,000.
4. $10,000.
5. $12,500.

Answer 1

2. $18,000

Step-by-step explanation:

The computation of the amount of salaries allocated to grinding is shown below:

= Total salaries × grinding number of employees ÷ total number of employees

= $30,000 × 1,500 employees ÷ 2,500 employees

= $18,000

Simply we find out the allocated amount based on the number of employees

All other information which is given is not relevant. Hence, ignored it