Marks Corporation has two operating departments,Drilling and Grinding, and an of
ID: 2583860 • Letter: M
Question
Marks Corporation has two operating departments,Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Office Expenses Total Allocation Basis Salaries Depreciation Advertising $30,000 Number of employees 20,000 Cost of goods sold 40,000Net sales Drilling Grinding Total Item Number of employees1,000 Net sales Cost of goods sold 75,000$125,000 $200,000 1,500 2,500 $325,000 $475,000 $800,000 The amount of salaries that should be allocated to Drilling for the current period is:Explanation / Answer
Salaries Expense = $ 30,000
Total Number of Employees = 2,500
Hence, Activity Rate = Salaries Expenses / Total Number of Employees
= $ 30,000 / 2,500
= $ 12 per Employee
The amount of salaries expense allocated to Drilling = $ 12 Per Employee * 1,000 Employees
= $ 12,000
Hence the correct answer is $ 12,000