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 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)$48,000.
B)$ 55,000.
C)$103,000.
D)$104,000.
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 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)$48,000. 
B)$ 55,000. 
C)$103,000. 
D)$104,000. 
E)$110,000.

Quizplus · Accepted Answer

Maintenance expenses are allocated based on square footage, so we need to calculate the allocation rate per square foot.

Total maintenance expenses = $480,000 + $240,000 = $720,000

Total square footage = 44,000 + 36,000 = 80,000

Allocation rate per square foot = $720,000 / 80,000 = $9

To allocate maintenance expenses to the Assembly Department, we need to multiply the allocation rate by the square footage of the department:

Maintenance expenses for Assembly Department = $9 per square foot x 44,000 square feet = $396,000

Therefore, the amount of maintenance expenses that should be allocated to the Assembly Department for the current period is $55,000 (choice B).

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