Question

The Science Institute has three departments: Biology, Chemistry, and Physics. The institute's controller wants to estimate the cost of operating each department. He has identified several indirect costs that must be allocated to each department including $46,000 of indirect salaries, $6,000 of office supplies, and $38,000 of office rent. There are 500 students in the biology department, 200 in chemistry and 300 in physics. The director of the Institute wants to know how much of the indirect cost to allocate to each department. Based on this information

Answer 1

Answer:

Biology department = $45,000

Chemistry department = $18,000

Physics department = $27,000

Explanation:

The total indirect costs are:

$46,000 of indirect salaries + $6,000 of office supplies + $38,000 of office rent = $90,000.

The total number of students is:

500 in biology + 200 in chemistry + 300 in physics = 1,000 students in total.

If we divide the total indirect costs by the total students we obtain the cost per student:

Cost per student = $90,000 / 1,000

                            = $90

To find what amounts to allocate, we multiply that number by the number of students in every deparment:

Biology = $90 x 500

             = $45,000

Chemistry = $90 x 200

                 = $18,000

Physics = $90 x 300

             = $27,000