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Zachary Corporation’s computer services department assists two operating departments in using the company’s information system effectively. The annual cost of computer services is $505,000. The production department employs 35 employees, and the sales department employs 15 employees. Zachary uses the number of employees as the cost driver for allocating the cost of computer services to operating departments. Required Allocate the cost of computer services to operating departments.

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Answer:

Production= $353,500

Sales= $151,500

Explanation:

Giving the following information:

The annual cost of computer services is $505,000.

The production department employs 35 employees, and the sales department employs 15 employees.

First, we need to calculate the proportion of employees in each department:

Production= 35/50= 0.7

Sales= 15/59= 0.3

Now, we can allocate overhead:

Production= 505,000*0.7= $353,500

Sales= 505,000*0.3= $151,500

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