Question

Complete (assume $60,000 of overhead to be distributed): (Enter amount of overhead allocated as whole dollar amounts. Round your ratio answers to the nearest hundredth.) Sq. Ft. Ratio Amount of Overhead Allocated Dept. A 10,000 A B Dept. B 30,000 C D

Answer 1

The completion of the ratios, resulting from the square feet occupied by Departments A and B, and the amounts of allocated overhead costs to the two departments are as follows:

                           Ratio      Amount

Department A     0.25       $15,000

Department B     0.75      $45,000

What is the ratio?

The ratio is the proportion of the whole shared by two or more numbers.

Ratios are fractional values like proportions.

Ratios, depicted in fractions, decimals, and percentages, show how much a value or variable is contained in another.

Total distributable overhead = $60,000

Ratios = 10,000:30,000

= 1:3

Sum of Ratios = 4

OR

= 0.25:0.75

Sum of Ratios = 1

Overhead Allocation:

Department   Square Feet  Ratio    Amount of Overhead Allocated

Dept. A            10,000         A = 1      B = $15,000 ($60,000 x 0.25)

Dept. B            30,000        C = 3     D = $45,000 ($60,000 x 0.75)

Thus, based on the cost driver ratios, Department A bears $15,000, while Department B will be allocated $45,000 of the distributable overheads.

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