Question

Smith Corporation has two service departments: Data Processing and Personnel. Data Processing provides more service than does Personnel. Smith Corporation also has two production departments: A and B. Data Processing costs are allocated on the basis of assets used while Personnel costs are allocated based on the number of employees. Department Direct Costs Employees Assets used Data Processing $1,000,000 15 $700,000 Personnel 300,000 8 230,000 A 500,000 12 125,000 B 330,000 20 220,000 Refer to Smith Corporation. Using the direct method, what amount of Data Processing costs is allocated to A (round to the nearest dollar)

Answer 1

Answer:

$474,819            

Explanation:

The computation of the amount of Data Processing costs is allocated to A is shown below:

Personal Cost

= 300,000 ÷ (12+20) × 12

= $112,500

And, the Data Processing Cost is

= 1000,000 ÷ (125,000 + 220,000) × 125,000

= 362,319

So, the Total cost is  $474,819