Question

Mervon Company has two operating departments: mixing and bottling. Mixing has 420 employees and Bottling has 280 employees. Indirect factory costs include administrative costs of $206,000. Administrative costs are allocated to operating departments based on the number of workers. Determine the administrative costs allocated to each operating department.

Answer 1

Mixing department = $123,600

Bottling department = $82,400

Step-by-step explanation:

The computation of the allocation of the administrative costs to each operating department is shown below:

Mixing department = 420 employees

Bottling department = 280 employees

Total square feet = 700 employees

Now the weightage would be

Mixing department = Mixing department employees ÷ Total employees

= 420 ÷ 700

= 0.6

And, for bottling department would be

= Bottling department square feet ÷ Total square feet

= 280 ÷ 700

= 0.4

Now the allocation would be

Mixing department = $206,000 × 0.6 = $123,600

Bottling department = $206,000 × 0.4 = $82,400