Question

Gonzalez Company has two service departments, Maintenance and Human Resources. Gonzalez Company also has two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees. The following information has been gathered for the current year.
Human Resources 6,000
Building Maintenance 13,000
Machining 18,000
Assembly 26,000

Assuming use of the direct method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?

Answer 1

Answer: 44,000 square feet.

Explanation:

If we are assuming use of the direct method, we can find out how the building maintenance cost will be allocated using the following formula,

Building Maintenance cost square feet allocation = Square Footage of Machining + Square Footage of Assembly

Slotting in the figures we have,

= 18,000 + 26,000

= 44,000 square feet.

The Building Maintenance cost will be allocated over 44,000 square feet.