Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Office Expenses Total Allocation Basis
Salaries $30,000 Number of employees
Depreciation 20,500​ Cost of goods sold
Advertising 41,500​ Net sales

Item Drilling Grinding Total
Number of employees 1080​ 1620​ 2700​
Net sales $326,625​ $477,375​ $804,000​
Cost of goods sold $76,500​ $127,500​ $204,000​

The amount of the total office expenses that should be allocated to Grinding for the current period is :

Total allocated costs= $63,221.7

Explanation:

First, we need to calculate the allocation rates based on the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Salaries= 30,000/2,700= $11.11 per number of employees

Depreciation= 20,500​/204,000= $0.10 per cost of goods sold dollar

Advertising= 41,500/804,000= $0.052 per net sales dollar

Now, we can allocate costs to Grinding:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Salaries= 11.11*1,620= 17,998.2

Depreciation= 0.10*204,000= 20,400

Advertising= 0.052*477,375= 24,823.5

Total allocated costs= $63,221.7

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