Question

In: Accounting

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 280 employees and occupies...

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 280 employees and occupies 66,000 square feet; Painting has 120 employees and occupies 44,000 square feet. Indirect factory expenses for the current period are as follows:

Administration $ 95,000
Maintenance $ 120,000


Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of maintenance expenses that should be allocated to the Painting Department for the current period is:

Multiple Choice

$72,000.

$66,500.

$138,500.

$48,000.

$144,000.

Solutions

Expert Solution

The correct answer is Option #4: $ 48,000, and the same is calculated below:

* Look under "Painting Department" Column for Answer value:

Assembly

Painting

Total

Area occupied in square feet

                                  66,000

                                                44,000

                110,000

% of total square feet

60%

40%

Allocation of Maintenance cost of $ 120,000

$                         72,000.00

$                                       48,000.00

$       120,000.00


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