Question

Palace Company has two service departments and two user departments. The number of employees in each department is:Personnel 10Cafeteria 25Producing Department A 308Producing Department B 287630The fixed costs of the Personnel Department are allocated on a basis of the number of employees. If these costs are budgeted at $72,450 during a given period, the amount of cost allocated to the Cafeteria under the step method would be:

Answer 1

Answer:

$3,483.17

Explanation:

Calculation for the amount of cost allocated to the Cafeteria under the step method

Using this formula

Allocation to Cafeteria=[Cafeteria/(Cafeteria+Producing Department A+Producing Department B)]×Budgeted costs

Let plug in the formula

Allocation to Cafeteria=[25/(25 + 308 + 287)] x $72,450

Allocation to Cafeteria=(25/520)×$72,450

Allocation to Cafeteria=0.0480769231×$72,450

Allocation to Cafeteria=$3,483.17

Therefore the amount of cost allocated to the Cafeteria under the step method would be $3,483.17