In: Accounting
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.
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 |