Suppose Hanger Corp. has three divisions, all using the warehouse: Pipes, Seals,

Question

Suppose Hanger Corp. has three divisions, all using the warehouse: Pipes, Seals, and Flanges. The total warehousing cost is $20,000. Total warehouse space is 100,000 square feet, of which Pipes uses 35,000 square feet, Seals uses 30,000 square feet , and Flanges uses 15,000 square feet. The remaining warehouse space is used by the warehouse manager. Which of the following is true?

a) traceable fixed costs are $16,000

b) traceable fixed costs are $20,000

c) common fixed costs are $16,000

d) common fixed costs are $20,000

Explanation / Answer

Total warehousing cost 20000 Total warehouse space 100000 sq ft Area used by Pipes 35000 sq ft Area used by Seals 30000 sq ft Area used by Flanges 15000 sq ft Total area used 80000 sq ft % of area that can be traced = 80000/100000 *100 = 80% Hence traceable fixed cost = 20000 * 80% = 16000 Hence option (a) is correct

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