Ransom Widgets Allocates the Estimated Cost of Its Accounting Department

question 37

Short Answer

Ransom Widgets allocates the estimated cost of its accounting department, $200,000, to its production and sales departments since the accounting department supports these departments with regard to payroll and accounts payable functions. The accounting department costs will be allocated based on the number of employees using the direct method. Information regarding employees follows: $$\begin{array} { l c } \text { Department } & \text { Employees } \\\text { Accounting } & 4 \\\text { Production } & 36 \\\text { Sales } & 12\end{array}$$ How much of the accounting department costs will be allocated to the production and sales departments, respectively? $$\begin{array} { l r r } & \text { Production } &{ \text { Sales } } \\\text { A. } & \$ 150,000 & \$ 50,000 \\\text { B. } & \$ 180,000 & \$ 60,000 \\\text { C. } & \$ 1,800,000 & \$ 600,000 \\\text { D. } & \$ 22,222 & \$ 66,667\end{array}$$

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