Brownley Company has two service departments and two operating (production)departments.The Payroll Department services all three of the other departments in proportion to the number of employees in each.The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each.Listed below are the operating data for the current period:
-The total cost of operating the Milling Department for the current period is:
A)$14,280.
B)$15,912.
C)$76,500.
D)$90,780.
E)$92,412.

Question

Brownley Company has two service departments and two operating (production)departments.The Payroll Department services all three of the other departments in proportion to the number of employees in each.The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each.Listed below are the operating data for the current period: 
-The total cost of operating the Milling Department for the current period is:
A)$14,280. 
B)$15,912. 
C)$76,500. 
D)$90,780. 
E)$92,412.

Quizplus · Accepted Answer

First, we need to allocate the costs of the Payroll Department and the Maintenance Department to the operating departments.

Payroll Department:
- The total number of employees in the company is 350 (150 in Department A, 100 in Department B, and 100 in Department C).
- Department A receives 40% of the Payroll Department cost = $28,000 x 0.40 = $11,200
- Department B receives 30% of the Payroll Department cost = $28,000 x 0.30 = $8,400
- Department C receives 30% of the Payroll Department cost = $28,000 x 0.30 = $8,400

Maintenance Department:
- The total floor space in the company is 10,000 square feet (6,000 for Department A and 4,000 for Department B).
- Department A receives 60% of the Maintenance Department cost = $24,000 x 0.60 = $14,400
- Department B receives 40% of the Maintenance Department cost = $24,000 x 0.40 = $9,600

Now, we can calculate the total cost of each operating department:
- Department A: 
  - Direct costs = $42,000 + $28,000 + $14,400 = $84,400
  - Indirect costs = $11,200 (Payroll) + $14,400 (Maintenance) = $25,600
  - Total cost = $110,000
- Department B:
  - Direct costs = $30,000 + $18,000 + $9,600 = $57,600
  - Indirect costs = $8,400 (Payroll) + $9,600 (Maintenance) = $18,000
  - Total cost = $75,600

Finally, we can calculate the total cost of the Milling Department:
- Direct costs = $45,000
- Indirect costs = $25,600 (Payroll) + $0 (Maintenance) = $25,600
- Total cost = $70,600

Therefore, the answer is E) $92,412. None of the given choices are correct.

Brownley Company Has Two Service Departments and Two Operating (Production)departments