The Merchant Manufacturing Co. has two servicing departments - purchasing and ma

Question

The Merchant Manufacturing Co. has two servicing departments - purchasing and maintenance - and two production departments - fabrication and assembly. The distribution of each service department's efforts to the other departments is shown below:

FROM                               TO

                                Purchasing      Maintenance    Fabrication      Assembly

Purchasing                   0%                    60%                 10%                  30%

Maintenance                20%                    0%                 30%                   50%

The direct operating costs of the departments (including both variable and fixed costs) were as follows:

Purchasing: 96,000

Maintenance: 18,000

Fabrication: 72,000

Assembl: 48,000

The total cost accumulated in the fabrication department using the step method is (assuming the purchasing department goes first; calculate all ratios and percentages to 4 decimal places , for example 33.3333%, and round all dollar amounts to the nearest whole dollar)

A.104,500

B.109.950

C.124,050

D.130,750

E.136,500

Explanation / Answer

B.109.950

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