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:

Question: The total cost of operating the milling department for the current period is?

A. 19,082 B. 23324 C. 5040 D. 123736 E 122104?

Service Depts Production Depts Payroll Maintenance Milling Assembly $25,200 %37,500 $100,500 $153,400 Direct costs No. of personnel Sq. ft. of space 39 39 14,800 19,800

Explanation / Answer

Answer is D. $ 123,736 Explanation STATEMENT OF ALOCATION OF INDIRECT COST TOTAL PAYROLL MAINTENANCE MILLING ASSEMBLY Direct cost 316600 25200 37500 100500 153400 Add: Cost of Payroll Deptt. 0 -25200 5040 5040 15120 (In ratio of No. of personel i.e.39:39:117) Total 316600 0 42540 105540 168520 Add: Cost of Maintenance Deptt. 0 -42540 18196.3 24343.7 (in ratio of Sq. ft space i.e. 14800:19800) Total cost of each deptt. 316600 0 0 123736 192864

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