Question

Mervon Company has two operating departments: mixing and bottling. Mixing occupies 27,235 square feet. Bottling occupies 14,665 square feet. Indirect factory costs include maintenance costs of $246,000. If the 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

The amount of maintenance costs allocated to each operating department is $159,900 to mixing and $86,100 to bottling

Step-by-step explanation:

In order to determine the amount of maintenance costs allocated to each operating department we would have to calculate first the percentage of area for each deparment as follows:

Particular Area in square feet %

mixing 27,235 65

bottling 14,665 35

Total Area 41,900 100

Therefore, if the maintentance cost is $246,000, the amount of maintenance costs allocated to each operating department is as follows:

Particular % Allocation of expense

mixing 65 159,900=246,000×65/100

bottling 35 86,100=246,000×35/100

100 246,000