Problem 4-25A
Part A
Labour Hours Used Base
Department 1
1,) Total cost Allocated/ Total Allocation Base = Allocation Rate
2,) 600,000/16,000 = 37.5
3,) Allocation Rate x Amount of allocation base used = Cost Allocation
4,) 37.5 x 2000 = 75,000
Department 2
1,) Total cost Allocated/ Total Allocation Base = Allocation Rate
2,) 600,000/16,000 = 37.5
3,) Allocation Rate x Amount of allocation base used = Cost Allocation
4,) 37.5 x 14000 = 525,000
Part B
Machine Hours used
Department 1
1,) Total cost Allocated/ Total Allocation Base = Allocation Rate
2,) 600,000/24000 = 25
3,) Allocation Rate x Amount of allocation base used = Cost Allocation
4,) 25 x 4,000 = 100,000
Department 2
1,) Total cost Allocated/ Total Allocation Base = Allocation Rate
2,) 600,000/24000 = 25
3,) Allocation Rate x Amount of allocation base used = Cost Allocation
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