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
<h3>What is the ratio?</h3>
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
<h3>Overhead Allocation:</h3>
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 <u>$15,000</u>, while Department B will be allocated <u>$45,000</u> of the distributable overheads.
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