Medusa Company allocates costs from the payroll department (S1) and the maintena
ID: 2523449 • Letter: M
Question
Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory. Information about the departments is presented below: n Number ofNumber of Square Department Costs Employees Feet Occupied Payroll (S1) $142,000 Maintenance (S2) Molding (P1) Finishing (P2) Packaging (P3) 2,000 $220,000 8I 64.000 100.000 60,000 40,000 64 16 Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar What amount of the payroll department costs will be allocated to the molding department? Your AnswerExplanation / Answer
In the direct method to allocate costs, service department costs are apportioned to production departments only ignoring service rendered by one service department to the other.In this question, payroll department and maintenance department costs are allocated to prodution department according to number of employees and number of square feet.
The amount of the payroll department costs will be allocated to the molding department is calculated as follow:
Total number of employees in production deparments( P1,P2 & P3) = 64 + 44 + 16 = 124
The amount allocated to molding department = 142,000 x 64/124 = $ 73,290
Hence, the amount of the payroll deprtment costs will be allocated to the molding department is $ 73,290.