Ready Company has two operating (production) departments: Assembly and Painting.
ID: 2533710 • Letter: R
Question
Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 210 employees and occupies 37,000 square feet. Painting has 210 employees and occupies 23,000 square feet. Indirect factory expenses for the current period are as follows:
Adminstration: $73,000
Maintenance: $93,000
Adminstration 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 Assembly Department for the current period is (Do not round your intermediate calculations and round your final answer to the nearest whole dollar)
A. $93,850
B. $103,000
C. $57,350
D. $94,850
Explanation / Answer
Indirect factory expenses for Adminstration= $73,000
Cost Driver for the Adminstration = workers in each department
Total workers = 210 +210
= 420
Hence Activity Rate for the Administration = $ 73,000 /420
= $ 173.8095238
Indirect factory expenses for Maintenance= $93,000
Cost Driver for the Adminstration = square footage
Total square footage = 37,000 +23,000
= 60,000
Hence Activity Rate for the Administration = $ 93,000 /60,000
= $ 1.55
Hence, Cost alloacted to the Assembly Department
= $ 173.8095238 * 210 + $ 1.55 * 37,000
= $ 93,850
Hence the correct answer is A. $ 93,850
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