Question

Qs 22-2 allocating costs to departments lo p1 mervon company has two operating departments: mixing and bottling. mixing has 300 employees and occupies 22,000 square feet. bottling has 200 employees and occupies 18,000 square feet. indirect factory costs for the current period follow: administrative, $160,000; and maintenance, $200,000. administrative costs are allocated to operating departments based on the number of workers. determine the administrative costs allocated to each operating department.

Answer 1

The total administrative costs for Mervon company are $160,000. There are a total of 500 workers between the bottling and mixing operations. The mixing operations have 300 employees and the bottling have 200 employees. Since the administrative costs are allocated to the two departments based on the number of workers, then, 200/500=0.4 x $160,000= $64,000 to the bottling operation and 300/500= $96,000 to the mixing operations for a total of the $160,000.