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. Compute the amount of Purchasing department expense to be allocated to Fabrication. Purchasing Maintenance Fabrication Assembly Operating costs $ 42,000 $ 24,000 $ 106,000 $ 72,000 No. of purchase orders 15 5 Sq. ft. of space 3,800 2,200

Answer 1

Answer:

The amount of Purchasing department expense to be allocated to Fabrication is $31,500.

Explanation:

Note: The data in this question are merged together. They are therefore sorted before answering the question as follows:

                                          Purchasing    Maintenance    Fabrication   Assembly

Operating costs                     $42,000         $24,000       $106,000     $72,000

No. of purchase orders                                                               15                  5

Sq. ft. of space                                                                          3,800         2,200

The explanation of the answer is now given as follows:

Amount allocated to Fabrication = Purchasing department expense * (No. of purchase orders by Fabrication  / (No. of purchase orders by Fabrication + No. of purchase orders by Assembly)) = $42,000 * (15 / (15 + 5)) = $31,500

Therefore, the amount of Purchasing department expense to be allocated to Fabrication is $31,500.