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

Question

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:

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

Explanation / Answer

Administration Expense allocated to the Assembly Department for the current period = Total Administration Expense / Total workers * Workers in the Assembly Department

= $ 80,000 / ( 150 + 100) * 150

= $ 48,000

Hence the correct answer is $ 48,000

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