Brownley Company has two service departments and two operating (production) depa

Question

Brownley Company has two service departments and two operating (production) departments. The Payroll Department services all three of the other departments in proportion to the number of employees in each. The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each. Listed below are the operating data for the current period:

The total cost of operating the Maintenance Department for the current period is:

Multiple Choice

a. $24,480.

b. $28,070.

c. $42,500.

d. $49,980.

e. $43,070.

Service Depts. Production Depts. Payroll Maintenance Cutting Assembly Direct costs $ 37,400 $ 42,500 $ 93,500 $ 122,400 No. of personnel 32 32 96 Sq. ft. of space 11,700 16,700

Explanation / Answer

The total cost of operating the Maintenance Department for the current period is:

d. 49,980

Maintenace Cost: 42500

add: Payroll allocation: 37400/(32+32+96)*32=7480

Total 42500+7480=49980

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