Question

Brownley Company has two service departments and two operating (production) departments. The Payroll Department services all three of the other departments in proportion to the number of employees in each. The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each. Listed below are the operating data for the current period: Service Depts. Production Depts. Payroll Maintenance Milling Assembly Direct costs $ 23,400 $ 33,000 $ 91,500 $ 135,400 No. of personnel 30 30 90 Sq. ft. of space 13,000 18,000 The total cost of operating the Milling Department for the current period is (Do not round your intermediate calculations): Multiple Choice $17,280. $20,542. $4,680. $111,981. $110,349.

Answer 1

Answer:

$111,981

Explanation:

Allocation to Milling Department will be as follows:

Direct Cost = $91,500

Allocation of payroll

Payroll cost = $23,400

Total personnel = 30 + 30 + 90 = 150

Payroll cost allocated = ($23,400/150) $\times$ 30 = $4,680

Allocation of maintenance

Maintenance Cost = $33,000

Maintenance area total = 13,000 + 18,000 = 31,000 sq feet

Cost allocated to milling = ($33,000/31,000) $\times$ 13,000 = $13,838.71

Total cost allocated = $91,500 + $4,680 + $13,838.71 = $110,018

Further cost of Maintenance allocated through payroll will be allocated to production departments = ($4,680/31,000) $\times$ 13,000 = $1,962.5

Total = $110,018 + $1,963 = $111,981