Question

CakeCo, Inc. has three operating departments. Information about these departments is listed below. Maintenance is service department at CakeCo that incurred $12,000 of costs during the period. If allocated maintenance cost is based on floor space occupied by each of the operating departments, compute the amount of maintenance cost allocated to the Baking Department

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Maintenance is the service department at CakeCo that incurred $12,000 of costs during the period. Overhead gets allocated based on floor space occupied by each of the operating departments.

We don't have enough information to calculate the allocated overhead, but, I can leave the formulas and a small example to help with an answer.

For example:

Total floor space= 10,000 square foot.

Baking department= 3,000 sq.

First, we need to calculate the estimated overhead rate:

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 12,000/10,000= $1.2 per square foot.

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 1.2*3,000= $3,600