Jamison Company has two service departments and two producing departments. Square footage of space occupied by each department follows:Custodial services1,700feetGeneral administration3,700feetProducing Department A8,700feetProducing Department B8,700feet 22,800feetThe department costs of Custodial Services are allocated on a basis of square footage of space. If Custodial Services costs are budgeted at $45,000, the amount of cost allocated to General Administration under the direct method would be: Multiple Choice $7,400. $9,432. $7,303. $0.

Lets understand the basics. There are various methods through which cost of service department is allcated to another department. (1) Direct methods (2) Step down method (3) Reciprocal method In direct cost allocation method, cost of service department is allocated to production department. Special feature about direct method is that, allocation of one service department is not done on other service department under this method. Here in this case, As we understand above service department cost is not allocated to another service department therefore, Cost allocated to general administration under direct method = $0 So Option D is correct answer.

Answered: Jamison Company has two service…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Jamison Company has two service departments and two producing departments. Square footage of space occupied by each department follows:

Custodial services	1,700	feet
General administration	3,700	feet
Producing Department A	8,700	feet
Producing Department B	8,700	feet
	22,800	feet

The department costs of Custodial Services are allocated on a basis of square footage of space. If Custodial Services costs are budgeted at $45,000, the amount of cost allocated to General Administration under the direct method would be:

Multiple Choice

$7,400.
$9,432.
$7,303.
$0.

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