Question

Canfield Technical School allocates administrative costs to its respective departments based on the number of students enrolled, while maintenance and utilities are allocated per square feet of the classrooms.
Based on the information below, what is the total amount allocated to the Welding Department (rounded to the nearest dollar) if administrative costs for the school were $63,000, maintenance fees were $25,000, and utilities were $7,300?

Department Students Classrooms
Electrical 120 10,000 sq. ft.
Welding 70 12,000 sq. ft.
Accounting 50 8,000 sq. ft.
Carpentry 40 6,000 sq. ft.
Total 280 36,000 sq. ft.

Answer 1

Answer:

$26,516.67

Explanation:

Using the area occupied as a method of cost allocation (for maintenance and utilities expenses) will result in the departments occupying larger spaces bearing larger cost than departments occupying smaller spaces.

Furthermore, the same is applicable to the administrative expense which is based on the number of students.

Given that the administrative costs for the school were $63,000, maintenance fees were $25,000, and utilities were $7,300, the amount to be allocated to  welding department is

=  70/280 * $63,000 + 12,000/36,000 * ($25,000 + $7,300)

= $15,750 + $10,766.67

= $26,516.67