Westmore Company Has Two Service Departments and Two Operating Departments

question 133

Multiple Choice

Westmore Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Building \& } \\\text { Grounds }\end{array} & \text { Personnel } & \text { Operating A} & \text { Operating B } \\\hline \text { Departmental costs } & \$ 54,000 & \$ 200,000 & \$ 650,000 & \$ 800,000 \\\hline \text { Square Metres Occupied } & 1,000 & 3,000 & 12,000 & 15,000 \\\hline \text { Number of Employees } & 10 & 5 & 45 & 55 \\\hline \text { Direct Labour Hours } & & & 76,000 & 92,000 \\\hline\end{array}$ The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of direct labour hours.



- Assume that the company uses the direct method of allocating Service Department costs to Operating Departments.How much Building & Grounds cost would be allocated to Operating Department A?

• A) $20,903.
• B) $21,600.
• C) $24,000.
• D) $29,700.

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