Ready Company has two operating (production) departments: Assembly and Painting.

Question

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 222 employees and occupies 50,000 square feet. Painting has 160 employees and occupies 39,600 square feet. Indirect factory expenses for the current period are as follows:

Adminstration: $89,600

Maintenance: $112,000

Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The total amount of adminstration expense that should be allocated to the assembly department for the current period is:

A. $52,071

B. $62,500

C. $115,000

D. $122,000

Explanation / Answer

Administration expense should be allocated to Assembly department = $89,600 / (222+160) * 222

Administration expense should be allocated to Assembly department = $52,071

Answer is A. $52,071

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