The following is a partially completed lower section of a departmental expense a
ID: 2533694 • Letter: T
Question
The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Purchasing department expense to be allocated to Fabrication.
Operating costs:
Purchasing $52,000, Maintenance $30,000, Fabrication $116,000, Assembly $82,000.
No. of purchase orders: 14 for Fabrication and 6 for Assembly.
Sq Ft of space: 4,300 for Fabrication and 1,700 for Assembly.
A. $21,500
B. $8,500
C. $28,600
D. $36,400
Explanation / Answer
Cost of the Purchasing Department= $ 52,000
Cost Driver for the Purchasing Department=purchase orders
Total purchase orders = 20 orders
Hence, Per Purchase order cost = $ 52,000 / 20 Orders
= $ 2,600
The amount of Purchasing department expense to be allocated to Fabrication = Per Purchase order cost * purchase orders of the Fabrication
=$ 2,600 * 14 Orders
= $ 36,400
Hence the correct answer is D. $ 36,400
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