Question

Battery Company has two service departments, Maintenance, and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:

Budgeted Costs, Budgeted Maintenance-Hours, Number of Employees
Maintenance Department: $320,000, NA, 40
Personnel Department: $80,000, 800, NA
a: $160,000, 960, 160
b: $240,000, 640, 480
1. Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?
a. $96,000
b. $128,000
c. $156,000
d. $192,000
2. Using the direct method, what amount of Personnel Department costs will be allocated to Department B?
a. $20,000
b. $32,000
c. $48,000
d. $60,000
3. Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)
a. $64,000
b. $85,333
c. $114,667
d. $128,000
4. Using the direct method, what amount of Maintenance Department costs will be allocated to Department A?
a. $96,000
b. $128,000
c. $166,000
d. $192,000
5. Using the direct method, what amount of Personnel Department costs will be allocated to Department A?
a. $20,000
b. $32,000
c. $48,000
d. $60,000
6. Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)
a. $64,000
b. $85,333
c. $114,667
d. $128,000

Answer 1

1.) B

2.) D

3.) B

4.) D

5.) A

6.) D

Step-by-step explanation:

Budgeted Costs, Budgeted Maintenance-Hours, Number of Employees

Maintenance Department: $320,000, NA, 40

Personnel Department: $80,000, 800, NA

Operating Cost :

Department A = $160,000

Department B = $240,000

1.) 640/ (640 + 960) × $320,000 = $128,000

2.) 480/640 × $80,000= $60,000

3.) Department B: 640/2,400 × $320,000 = $85,333

4.) 960 / (640 + 96) × $320,000 = $192,000

5.) 160 / (160 + 480) × $80,000 = $20,000

6.) Maintenance provided to Personnel:

(960÷2400) × 320,000 = $128,000