Cost Allocation for Janitorial Services in Administration Department

How are the costs of janitorial services allocated under the direct method?

Under the direct method of cost allocation, how much would be allocated to the administration department for janitorial services costs if the total costs are $56,000?

Answer:

Under the direct method of cost allocation, $14,000 would be allocated to the administration department for janitorial services costs.

Under the direct method of cost allocation, the costs of janitorial services are allocated based on the actual square footage occupied by each department or cost center. Assuming that the administration department occupies a certain percentage of the total square footage, we can calculate the amount allocated to administration accordingly.

Calculating the Allocation:

Amount allocated to administration = Total janitorial services costs x Proportion of square footage occupied by administration

For example, if the administration department occupies 25% of the total square footage, the calculation would be:

Amount allocated to administration = $56,000 x 0.25 = $14,000

Therefore, $14,000 would be allocated to the administration department for janitorial services costs under the direct method of cost allocation.