McHugh Company allocates common Building Department costs to producing departmen
ID: 2433042 • Letter: M
Question
McHugh Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows:
If McHugh Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first, the ratio representing the portion of Personnel Department costs allocated to Department P2 is
a.90/140.
b.50/130.
c.50/140.
d.50/146.
Building Personnel Dept. P1 Dept. P2 Space occupied 2,000 ft. 10,000 ft. 120,000 ft. 70,000 ft. Employees 6 10 80 50Explanation / Answer
Total number of employees = 80+50 = 130
Number of employees in department P2 = 50
So the cost will be allocated = employees in department p2 / total employees = 50/130
Correct answer is b.