Question

Calico Company has two operating departments: Department A and Department B. Department A occupies 30% of the floor space of the company but accounts for 75% of the sales of the company. Department B occupies 70% of the floor space of the company but accounts for 25% of company sales. Cleaning expense (an indirect expense of the company), which consists primarily of vacuuming the carpet is $30,000 each year. How much cleaning expense should be allocated to Department B? $0 $7,500 $9,000 $21,000 $22,500 $30,000 Slide 6 Slide 6

Answer 1

Answer: $21,000

Explanation:

Cleaning expense is only related to the floor space occupied by the department.

If the company spend a total of $30,00 on cleaning each year.

And Department B occupies 70% of the company floor.

Therefore, the company spends 70% of their cleaning expense on department B

Hence, the cleaning expense on department B is given as;

= 70% of $30,000

= $21,000