Question

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:Administration $80,000Maintenance $100,000Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The total amount of administration expense that should be allocated to the Assembly Department for the current period is: a) $48,000. b) $55,000. c) $103,000. d) $104,000. e) $110,000.

Answer 1

Answer:

A) $48,000

Explanation:

Assembly                                   Painting                             Total

150 employees                          100 employees                 250 employees

44,000 square feet                   36,000 square feet          80,000 sq. feet

Administration expenses                                                     $80,000

= 150 x $320 = $48,000           = 100 x $320 = $32,000

Maintenance expenses                                                        $100,000

= 44,000 x $1.25 = $55,000    = 36,000 x $1.25 = $45,000

administration expenses = $80,000 allocated based on workers, $80,000 / 250 employees = $320 per employee

maintenance expenses = $100,000 allocated based on square feet, $100,000 / 80,000 sq. feet = $1.25 per sq. feet