Question

Support Department Cost Allocation—Direct Method Yo-Down Inc. produces yogurt. Information related to the company’s yogurt production follows: Production Department 1 Production Department 2 Production Department 3 Support Department 1 cost driver 6,400 1,200 400 Support Department 1’s costs total $140,000. Using the direct method of support department cost allocation, determine the costs from Support Department 1 that should be allocated to each production department. Production Department 1 Production Department 2 Production Department 3 Support Department 1 cost allocation $ $ $

Answer 1

Production Department 1=$112,000

Production Department 2= $21,000

Production Department 3= $7,000

Step-by-step explanation:

Calculation to determine the costs from Support Department 1 that should be allocated to each production department

Support department total cost drivers = Production Department 1 + Production Department 2 + Production Department 3

Support department total cost drivers= 6,400+1,200+400

Support department total cost drivers= 8,000

Support Department 1 allocation

Production Department 1=

140,000 x 6,400/8,000

= $112,000

Production Department 2

=140,000 x 1,200/8,000

= $21,000

Production Department 3

=140,000 x 400/8,000

= $7,000

Therefore the costs from Support Department 1 that should be allocated to each production department will be :

Production Department 1=$112,000

Production Department 2= $21,000

Production Department 3= $7,000