The Maryville Construction Company occupies 85,000 square feet for construction of mobile homes. There are two manufacturing departments, finishing and assembly, and four service departments labeled S1, S2, S3, and S4. Information relevant to Maryville is as follows:

Rent paid for the area used is $720,000.
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How much rent is allocable to the assembly department using the direct method of allocation?

Question

The Maryville Construction Company occupies 85,000 square feet for construction of mobile homes. There are two manufacturing departments, finishing and assembly, and four service departments labeled S1, S2, S3, and S4. Information relevant to Maryville is as follows:

Rent paid for the area used is $720,000.
-
How much rent is allocable to the assembly department using the direct method of allocation?

Quizplus · Accepted Answer

The direct method of allocation allocates rent based on the square footage of each department. The assembly department has 15,000 square feet, which is 60% of the total square footage of the factory. Therefore, the assembly department is allocated 60% of the total rent, which is $420,000.

The Maryville Construction Company Occupies 85,000 Square Feet for Construction