The fixed costs of Baxter Company\'s personnel department are allocated to opera
ID: 2468389 • Letter: T
Question
The fixed costs of Baxter Company's personnel department are allocated to operating departments on the basis of direct labor-hours. The following data have been provided:
Operating X Department Y
Direct-labor hours-long-run average- 15000 10000
Direct-labor hours-Actual 10000 6000
The fixed costs of the personnel department are budgeted at $56,000 per year and are incurred in order to support long-run average requirements. How much of this fixed cost should be charged to Operating Department X at the end of the year for performance evaluation purposes:
a. 35000
b. 33600
c. 52500
d. 22400
Explanation / Answer
b. 33600 Since the fixed costs are are incurred in order to support long-run average requirements therefore it should be allocated basis Direct-labor hours-long-run average Particulars Deptt X Deptt Y Total Direct-labor hours-long-run average- 15,000.00 10,000.00 25,000.00 Fixed Overheads 56,000.00 Fixed Overhead per Direct-labor hours-long-run average- 2.24 Allocation of Fixed Overheads Deptt X= 15,000 * 2.24 Deptt Y = 10,000 *2.24 33,600.00 22,400.00