Gravity Company Has Two Support Departments, Maintenance Department (MD) and Personnel

Multiple Choice

Gravity Company has two support departments, Maintenance Department (MD) and Personnel Department (PD) , and two producing departments, P1 and P2. The Maintenance Department costs of $120,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $18,000 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are $36,000 and $60,000, respectively. Data on standard service hours and number of employees are as follows:
What are the total overhead costs associated with P1 after allocating the Maintenance and Personnel Departments using the direct method?

A) $120,000
B) $125,000
C) $36,000
D) $18,000