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.

Answer 1

Answer:

$6,400

Explanation:

Re-write the Question for Easier Understanding

Purchasing   Maintenance   Fabrication  Assembly

$32,000        $18,0000         $96,000       $62,0000

 (No of Purchase Orders)     16                     4

 (Sq Foot of Space)                  3,300               2,700

Find:

Amount of Purchasing Department Expense to be allocated to Assembly.

• The Question clearly states that Purchasing Department's expenses are allocaated based on the Operating Department's Purchase Order
• Since total Purchase Order is 20 and Assembly's purchase order is 4
• Assembly's allocation of Purchasing Expense= Assembly's Purchase Order/ Total Purchase Order × Purchase Department Expense

=Total Purchase Order= Fabrication (16) + Assembly (4)= 20

=Purchase Order for Assemby= 4

=Purchasing Department Expense= $32,000

• =(4/20)× $32,000
• =0.2 × $32,000
• = $6,400