The Managers at Ithaca Manufacturing Are Discussing Ways to Allocate

Multiple Choice

The managers at Ithaca Manufacturing are discussing ways to allocate the cost of support departments such as Quality Control and Maintenance to the operating departments. To aid them in this discussion, the controller has provided the following information: Support Operating
Quality Maint-
Control enance Machining Assembly Total
Budgeted overhead costs
Before allocation $350,000 $200,000 $400,000 $300,000 $1,250,000
Budgeted machine hours 50,000 50,000
Budgeted direct labour hours 25,000 25,000
Budgeted hours of service:
Quality control 7,000 21,000 7,000 35,000
Maintenance 10,000 18,000 12,000 40,000
(CMA) If Ithaca Manufacturing decides not to allocate support costs to the operating departments, the overhead allocated to each direct labour hour in the Assembly Department would be:

A) $3.20
B) $3.50
C) $12.00
D) $16.00