[Anonymous]

Hi there, this should be an easy MCQ but I’m just not understanding how Wiley computes the $6,000 in the below question. Your help explaining this would be much appreciated.

Hartwell Company distributes service department overhead costs directly to producing departments without allocation to the other service department. Information for the month of January 2012 is as follows:

Service departments

Maintenance Utilities

Overhead costs incurred $18,700 $9,000

Service provided to:

Maintenance department — 10%

Utilities department 20% —

Producing department A 40% 30%

Producing department B 40% 60%

Total 100% 100%

The amount of utilities department costs distributed to producing department B for January 2012 should be

a) $3,600

b) $4,500

c) $5,400

d) $6,000 <– correct answer

Thanks 🙂

[mla1169]

The key is that they don't allocate to other service departments. So that 10% that says to the maintenance department has to be allocated to dept A (which becomes 33.33%) and dept B (which becomes 66.66%)

So 66.66 or 2/3 of $9,000 is $6,000.

Hope that helps.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[mla1169]

The key is that they don't allocate to other service departments. So that 10% that says to the maintenance department has to be allocated to dept A (which becomes 33.33%) and dept B (which becomes 66.66%)

So 66.66 or 2/3 of $9,000 is $6,000.

Hope that helps.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Anonymous]

Thank You, mla1169! That's a huge help :)!

[Anonymous]

Thank You, mla1169! That's a huge help :)!

[Author]

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