Question

Tennison Corporation has two service departments (Maintenance and Human Resources) and three production departments (Machining, Assembly, and Finishing). Maintenance is the larger service department and Assembly is the largest production department. The two service departments service each other as well as the three producing departments. On the basis of this information, which of the following cost allocations would not occur under the direct method?

a. Maintenance cost would be allocated to Human Resources.
b. Human Resources cost would be allocated to Finishing.
c. Machining cost would be allocated to Assembly.
d. Both machining cost would be allocated to Assembly and maintenance cost would be allocated to Human Resources.
e. Maintenance cost would be allocated to Finishing.

Answer 1

Answer:

The correct answer is "Both machining cost would be allocated to Assembly and maintenance cost would be allocate"

Explanation:

Under direct technique for designation, the expenses of administration divisions,  

- are not distributed to another help office, and  

- are distributed straightforwardly to the various offices.  

In view of over, the cost distribution that WOULD NOT OCCUR under direct strategy is  

Choice #4: Both machining cost would be designated to Assembly and support cost would be apportioned to Human Resources.  

This is on the grounds that:-  

- Machining cost would not be assigned to Assembly office as both are creation divisions.  

- Maintenance cost would not be apportioned to Humar asset as both are administration divisions.