Question

Luzent corporation has two​ departments, small and large. central costs could be allocated to the two departments in various ways. small department large department square footage ​6,750 ​17,250 number of employees ​1,120 480 sales ​$350,000 ​$1,750,000 if total payroll processing costs of​ $64,000 are allocated on the basis of number of​ employees, the amount allocated to the small department would be​ ________.

Answer 1

$19,200 If the $64,000 is to be allocated on the basis of the number of employees, then let's see how many employees we have. The large department has 1,120 employees and the small department has 480. It would make sense to allocate the same amount of cash per employee, so we have 1,120 + 480 = 1,600 total employees. So the amount per employee is $64,000 / 1,600 = $40 per employee. So the amount allocated to the small department should be: $40 * 480 = $19,200 So $19,200 is the amount to allocate to the small department.