Bridgestreet, Inc. has three operating departments: Cutting, Assembling, and Fin

Question

Bridgestreet, Inc. has three operating departments: Cutting, Assembling, and Finishing. Cutting has 4,000 employees and occupies 38,400 square feet. Assembling has 3,200 employees and occupies 27,600 square feet. Finishing has 800 employees and occupies 62,000 square feet. Indirect factory costs for the current period were Administrative $560,000 and Maintenance $700,000. Administrative costs are allocated to operating departments based on the number of workers and maintenance costs are allocated to operating departments based on square footage occupied.

Based on the preceding data, determine the administrative cost allocated to each operating department of Bridgestreet, Inc.

Bridgestreet, Inc. has three operating departments: Cutting, Assembling, and Finishing. Cutting has 4,000 employees and occupies 38,400 square feet. Assembling has 3,200 employees and occupies 27,600 square feet. Finishing has 800 employees and occupies 62,000 square feet. Indirect factory costs for the current period were Administrative $560,000 and Maintenance $700,000. Administrative costs are allocated to operating departments based on the number of workers and maintenance costs are allocated to operating departments based on square footage occupied.

Explanation / Answer

Hi,

Please find the answer as follows:

Total Administrative Cost = 560000

Total Number of Workers = 4000 (Cutting) + 3200 (Assembling) + 800 (Finishing) = 8000

Allocation of Administrative Cost = Total Administrative Cost*Number of Workers in the Department/Total Number of Workers

Cutting = 560000*4000/8000 = 280000

Assembling = 560000*3200/8000 = 224000

Finishing = 560000*800/8000 = 56000

Option D is correct.

Thanks.

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