Bookman Company has three operating departments: Department A, Department B and

Question

Bookman Company has three operating departments: Department A, Department B and Department C. 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.

Departments Department A Department B Department C
Number of employees 2,700 employees 6,300 employees 9,000 employees
Square feet occupied 52,500 Sq. Ft. 67,500 Sq. Ft. 30,000 Sq Ft.

Assume that Bookman allocated $11,250 administrative costs to Department A. Based on the above data, determine the company's total administrative costs.
$32,143
$1,687
$22,500
$75,000
$5,625

Explanation / Answer

administrative costs allocated to Department A=11250
no. of employees in department A=2700 employees
total employees in three departments=2700+6300+9000=18000

department A cost=total cost*no. of employees in department A/total employees
11250=total cost*2700/18000
by cross multiply
11250*18000=total cost*2700
202500000=total cost*2700
total cost=202500000/2700=$75000

$32,143
$1,687
$22,500
$75,000
$5,625

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