Bradley Corporation has three production departments A, B, and C. Bradley Corporation also has two service departments, Administration and Personnel. Administration costs are allocated based on value of assets employed, and Personnel costs are allocated based on number of employees. Assume that Administration provides more service to the other departments than does the Personnel Department. Dept
Direct Costs Employees Asset Value Admin. $900,000 25 $450,000 Personnel 350,000 10 600,000 A 700,000 15 300,000 B 200,000 5 150,000 C 250,000 10 800,000 Refer to Bradley Corporation. Using the direct method, what amount of Administration costs is allocated to A (round to the nearest dollar)?
a. $216,000
b. $150,000
c. $288,000
d. $54,000
A
$900,000 * (300,000/1,250,000) = $216,000
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