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: Service Depts. Production Depts. Payroll Maintenance Cutting Assembly Direct costs $20,600 $26,000 $77,500 $107,400 No. of personnel 16 16 48 Sq. ft. of space 10,200 15,200 The total cost of operating the Cutting Department for the current period is: $4,120. $93,715. $16,220. $14,480.

Explanation / Answer

Calculate cost of operating the cutting department for the current period :

so answer is b) $93,715

Cutting department Direct cost 77500 Allocation of payroll department cost (20600*16/80) = 4120 Allocation of maintenance department cost (26000+4120)*10200/25400 12095 Total operating cost 93715

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