Question

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage.
Purchasing Maintenance Fabrication Assembly
Operating costs $32,000 $18,000 $96,000 $62,000
No. of purchase orders 16 4
Sq. ft. of space 3,300 2,700
Required:

Compute the amount of Purchasing department expense to be allocated to Assembly.

a. $6,400.

b. $9,900.

c. $8,100.

d. $14,400.

e. $25,600.

Answer 1

Answer:

a. $6,400.

Explanation:

In solving this question on Computing the amount of Purchasing department expense to be allocated to Assembly, we'll have to use the formula below:

Purchasing department expense to be allocated to Fabrication = Total Cost of purchasing department X number of purchase order in / Total numbers of purchase orders in all operating departments

= $32000 X 4/20 = $6,400