Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:
Administration $ 80,000
Maintenance $ 100,000
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Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of maintenance expenses that should be allocated to the Assembly Department for the current period is:
A) $ 55,000.
B) $103,000.
C) $104,000.
D) $ 48,000.
E) $110,000.

Question

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:
 Administration $ 80,000
Maintenance $ 100,000
- 
Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of maintenance expenses that should be allocated to the Assembly Department for the current period is:
A) $ 55,000.
B) $103,000.
C) $104,000.
D) $ 48,000.
E) $110,000.

Quizplus · Accepted Answer

Maintenance expenses are allocated based on square footage. The Assembly Department occupies 44,000 out of a total of 80,000 square feet (44,000 + 36,000). Therefore, the allocation is (44,000/80,000) * $100,000 = $55,000.

Ready Company Has Two Operating (Production) Departments: Assembly and Painting