Question

Calico Company has two operating departments: Department A and Department B. Department A occupies 30% of the floor space of the company but accounts for 75% of the sales of the company. Department B occupies 70% of the floor space of the company but accounts for 25% of company sales. Cleaning expense (an indirect expense of the company), which consists primarily of vacuuming the carpet is $30,000 each year. How much cleaning expense should be allocated to Department B

Answer 1

Answer: $21000

Explanation:

Based on the information given in the question, the cleaning expense should be allocated to Department B will be the percentage of floor space occupied by Department B multiplied by the cleaning expense. This will be:

= 70% × $30,000

= 70/100 × $30,000

= 0.7 × $30,000

= $21000