Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of...

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Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of...

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	$	52,000	Number of employees
Depreciation		37,000	Cost of goods sold
Advertising		75,000	Net sales

Item	Drilling		Grinding		Total
Number of employees		1,600		2,400		4,000
Net sales	$	400,000	$	600,000	$	1,000,000
Cost of goods sold	$	152,000	$	248,000	$	400,000

The amount of salaries that should be allocated to Drilling for the current period is:

business accounting

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Answer 1

Answer #1

Activity Rate for Salaries = Total Cost / Total Number of employees

= $ 52,000 / 4,000

= $ 13 per employee

The amount of salaries that should be allocated to Drilling for the current period is =Activity Rate for Salaries * Number of employees for drilling

= $ 13 per employee * 1,600 employees

= $ 20,800

Hence the correct answer is $ 20,800

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Answer 2

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