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 total amount of indirect factory expenses that should be allocated to the Painting Department for the current period is:
A) $ 77,000.
B) $110,000.
C) $ 55,000.
D) $ 48,000.
E) $103,000.

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
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Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The total amount of indirect factory expenses that should be allocated to the Painting Department for the current period is:
A) $ 77,000.
B) $110,000.
C) $ 55,000.
D) $ 48,000.
E) $103,000.

Quizplus · Accepted Answer

Administration expenses are allocated based on the number of workers in each department. Since the Painting Department has 100 employees and the Assembly Department has 150 employees, the Painting Department will be allocated 100/250 * $80,000 = $32,000 of administration expenses.Maintenance expenses are allocated based on the square footage occupied by each department. Since the Painting Department occupies 36,000 square feet and the Assembly Department occupies 44,000 square feet, the Painting Department will be allocated 36,000/80,000 * $100,000 = $45,000 of maintenance expenses.Therefore, the total amount of indirect factory expenses that should be allocated to the Painting Department for the current period is $32,000 + $45,000 = $77,000.

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