Question

Linden, Inc. uses a 6,500 square foot factory space that it rents for $2,600 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 3,300 square feet of the factory are used for machining, while 1,100 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 1,000 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool

Answer 1

the allocation of the factory rent assigned is $440

Step-by-step explanation:

The computation of the allocation of the factory rent assigned is given below:

= Total rent ÷ total space × space used by preparation and setup

= $2,600 ÷ 6,500 square foot × 1,100 square foot

= $440

hence, the allocation of the factory rent assigned is $440