Consider the following information: A company has 5 departments; M and N (both operating) and R,...
Consider the following information: A company has 5 departments; M and N (both operating) and R, S and T (all three supporting).
Total secondary allocation (including own indirect costs) for department M and N is 250 and 300, respectively.
Primary allocation is 200 and 280 for department M and N, respectively.
Allocation bases to assign indirect costs to products are kg of paint (25kg) for department M and number of units produced (10units) for department N. What is the indirect cost rate for the M department?
Select one:
a. €10/kg
b. €10/unit
c. €18/kg
d. €8/kg
Homework Answers
Answer
Option C i.e. Euro 18
Calculations:
| Department M | Department N | |
| Primary allocation | € 200 | € 280 |
| (+) Secondary allocation | € 250 | € 300 |
| (=) Total costs | € 450 | € 580 |
| (/) Allocation base | 25 | 10 |
| (=) Cost rate | € 18 | € 58 |
Clearly, option c is correct and other options are incorrect.
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