Question

Lamingos, Inc. has two service departments and two operating (production) departments. Administrative Department costs are allocated to the Assembly and Packaging departments based on the number of employees, and Maintenance Department costs are allocated to the Assembly and Packaging departments based on square feet occupied. Data for these departments follows:

Department Direct Expenses No. of employees Sqaure Feet
Administrative $30,000
Maintenance 15,000
Assembly 70,000 6 2,000
Packaging 45,000 4 3,000

The total amount of the Administrative Department's cost that would eventually be allocated to the Packaging Department is: __________

Answer 1

Packaging= $12,000

Step-by-step explanation:

First, we need to calculate the allocation rate of the Administrative Department:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Allocation rate= 30,000 / (6 + 4)

Allocation rate= $3,000 per employee

Now, we can allocate to the Packaging Department:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Packaging= 3,000*4

Packaging= $12,000