Question

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

Office expenses:
- Salaries: $31,000
- Depreciation: $21,000
- Advertising: $41,000

Allocation basis:
- Number of employees
- Percentage of total sales
- Department

The department information is as follows:
- Drilling: 800 employees, $330,000 sales, $79,800 cost of goods sold
- Grinding: 1,200 employees, $495,000 sales, $130,200 cost of goods sold

The amount of salaries that should be allocated to grinding for the current period is:
1) $9,750
2) $15,500
3) $18,250
4) $23,250

Answer 1

The amount of office salaries allocated to the Grinding department is $18,600, which is calculated by multiplying the total office salaries of $31,000 by 60%, corresponding to the department's proportion of total employees.

Step-by-step explanation:

Calculation of Salaries Allocation to Grinding Department

To calculate the amount of office salaries that should be allocated to the Grinding department, we must look at the total number of employees as the allocation basis for salaries. The combined number of employees in both departments (Drilling and Grinding) is 800 + 1,200 = 2,000. The proportion of employees in the Grinding department is 1,200/2,000, which is 60% of the total. Thus, the Grinding department should be allocated 60% of the office salaries:

Total office salaries: $31,000

Proportion for Grinding:

60% of $31,000 = 0.60 x $31,000 = $18,600