The allocation rate for the accounting department is $250.
Further Explanation:
Cost allocation:
Cost allocation refers to the process of allocating the cost of the business to the various departments. The management of the company has to calculate the cost incurred by each department. There are some expenses which are incurred collectively, so the management has to allocate the common cost to the various departments. The allocation of the cost should be done in a manner of the utilization of the expenses or cost by that specific department.
Calculate the support department allocation rate for the accounting department:
The allocation of the accounting department cost will be made on the basis of number of invoices processed. The services of accounting department are used for the preparation of the invoices. So, the cost of accounting will be allocated on the basis of the number of invoices.
Calculate the allocation rate for the accounting department:
<u>Thus, the allocation rate for the accounting department is $250 per invoice.</u>
Working Note:
Calculate the total number of invoices processed:
The total number of invoices is 2,000.
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Answer details:
Grade: Senior School
Subject: Cost Accounting
Chapter: Activity-Based Costing
Keywords: Activity-Based Costing, Costing, Cost accounting, Allocation of cost, Cost allocation, Fixed costing, Variable costing, Departmental costing, Accounting, Direct expenses, Indirect expenses, Cost, ABC costing.