Question

Mervon Company has two operating departments: Mixing and Bottling. Mixing occupies 25,380 square feet. Bottling occupies 16,920 square feet. Indirect factory costs include maintenance costs of $238,000.

Required:
a. If maintenance costs are allocated to operating departments based on square footage occupied, determine the amount of maintenance costs allocated to each operating department

Answer 1

Mixing = $142,800

Bottling = $95,200

Step-by-step explanation:

Th amount of indirect cost of maintenance to be allocated to the two departments would be as follows:

Allocated Maintenance department cost :

Mixing = 25,380/( 25,380 +16,920) × $238,000 = 142800

Bottling = 16,920/( 25,380 +16,920) × $238,000= 95200

Allocated maintenance overheads

Mixing = $142,800

Bottling = $95,200