Metro Inc. has two production departments (Lamination and Molding) and three service departments (Human Resources, Technology Support, and Purchasing). Service department costs are allocated to production departments using the direct method. The $200,000 costs of Human Resources are allocated based on the number of employees in each production department. The Lamination department has 40 employees and the Molding department has 120 employees. Using the direct method of allocating service department costs to production departments, how much of the Human Resource service department costs should be allocated to the Lamination Department

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Business

Jace

19 August, 19:57

Metro Inc. has two production departments (Lamination and Molding) and three service departments (Human Resources, Technology Support, and Purchasing). Service department costs are allocated to production departments using the direct method. The $200,000 costs of Human Resources are allocated based on the number of employees in each production department. The Lamination department has 40 employees and the Molding department has 120 employees. Using the direct method of allocating service department costs to production departments, how much of the Human Resource service department costs should be allocated to the Lamination Department

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Answers (1)

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Lillian Harding · Answer 1

Lamination = $50,000

Explanation:

Giving the following information:

Metro Inc. has two production departments:

Lamination and Molding

Three service departments:

Human Resources, Technology Support, and Purchasing.

The $200,000 costs of Human Resources are allocated based on the number of employees in each production department.

The Lamination department has 40 employees.

The Molding department has 120 employees.

Proportion of employees:

Lamination = 40/160 = 25%

Molding = 120/160 = 75%

Allocation:

Lamination = 200,000*0.25 = $50,000

Molding = 200,000*0-75 = $150,000