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 The amount of salaries that should be allocated to Grinding for the current period is:

Answer 1

Allocated salary to Grinding = $18,000

Step-by-step explanation:

The Salary would be allocated between the department using the number f employees as the basis of allocation. This is so because number of employees would be a reasonable factory that influences the amount incurred as salary expense.

This is done as follows:

Allocated Salary expense =

Number of employee in a department/Total employee× Salary

Allocated salary to Grinding Department

= 1500/2500× $30,000=$18,000

Allocated salary to Grinding = $18,000