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The Technology department at Watkins Transit has a budgeted annual cost of $65,000. The department has a capacity to handle 250 work stations per year. Currently, purchasing, shipping, and administrative departments have 20, 45, and 135 work stations, respectively. If practical capacity is used to allocate costs, how much cost is allocated to shipping

Sagot :

Answer: $14,625

Explanation:

Based on the information given, if practical capacity is used to allocate cost, the cost that is allocated to shipping will be:

= Budgeted annual cost/200 × Number of shipping work stations

= 65000/200 × 45

= $14,625

Cost Allocation is the process of allocating an item of cost to an item of cost, which is directly followed. The cost that is allocated to shipping will be $14,625.

What is called costs allocation?

Cost Allocation is the process of identifying, accumulating, and allocating costs to expense items such as departments, products, systems, and many others.

Based on the information given, if practical capacity is used to allocate cost, the cost that is allocated to shipping will be:

[tex]\rm\, Cost \;that \;is \; allocated \; to \;shipping = \rm\, \frac{ \;Budgeted \; Annual \;Cost}{200} \times \;Number \;of \; shipping \;work \;stations\\\\= \dfrac{65000}{200} \times 45\\\\= \$14,625[/tex]

Hence, the cost that is allocated to shipping is $14,625.

To learn more about costs allocation, refer:

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