Question

Ice House Industries, Inc. has three operating departments: Cooking, Churning and Freezing. Indirect factory costs for the current period were Administrative, $560,000 and Maintenance, $98,000. Administrative costs are allocated to operating departments based on the number of workers and maintenance costs are allocated to operating departments based on square footage occupied.

cooking depart churning depart freezing depart
number of employees 2,940 employees 4,900 employees 1,960 employees
square feet occupied 33,250 Sq Ft 38,000 Sq Ft 23,750 Sq Ft
1. Based on the above data, determine the administrative cost allocated to each operating department of Ice House Industries, Inc.
(A) Cooking: $168,000 Churning: $280,000 Freezing: $112,000
(B) Cooking: $186,666 Churning: $186,666 Freezing: $186,666
(C) Cooking: $112,000 Churning: $280,000 Freezing: $168,000
(D) Cooking: $280,000 Churning: $112,000 Freezing: $168,000
(E) Cooking: $219,333 Churning: $219,333 Freezing: $219,333
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
2. Based on the above data, determine the maintenance cost allocated to each operating department of Ice House Industries, Inc.
(A) Cooking: $219,333 Churning:$219,333 Freezing: $219,333
(B) Cooking: $230,00 Churning: $263,200 Freezing:$164,500
(C) Cooking: $33,250 Churning: $38,000 Freezing:$23,750
(D) Cooking: $32,666 Churning: $32,666 Freezing:$32,666
(E) Cooking:$34,300 Churning: $39,200 Freezing:$24,500
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

Answer 1

1. (A) Cooking: $168,000 Churning: $280,000 Freezing: $112,000

2. (E) Cooking:$34,300 Churning: $39,200 Freezing:$24,500

Step-by-step explanation:

The computation is shown below:

a. For administrative cost allocated to each operating department is

Cooking

= $560,000 × 2,940 ÷ (2,940 + 4,900 + 1,960)

= $168,000

Churning

= $560,000 × 4,900 ÷ (2,940 + 4,900 + 1,960)

= $280,000

Freezing

= $560,000 × 1,960 ÷ (2,940 + 4,900 + 1,960)

= $112,000

b. For maintenance cost allocated to each operating department is

Cooking

= $98,000 × 33,250 ÷ (33,250 + 38,000 23750)

= $34,300

Churning

= $98,000 × 38,000 ÷ (33,250 + 38,000 23750)

= $39,200

And, for freezing

= $98,000 × 23,750 ÷ (33,250 + 38,000 23750)

= $24,500