City Inspections Has Three Departments Using the Services of the Payroll

Multiple Choice

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $20,000. The operating income for each for the departments is as follows: Annual inspections department $10,000; Emergency services department $50,000; Roads department $40,000 If City Inspections allocates shared payroll costs using operating income as the allocation base, what will be the net income of each department after allocating shared payroll costs.

A) Annual inspections $1,000; Emergency services $5,000; Roads $4,000
B) Annual inspections $9,000; Emergency services $45,000; Roads $36,000
C) Annual inspections $11,000; Emergency services $55,000; Roads $44,000
D) Annual inspections $6,667; Emergency services $46,667; Roads $36,666