Question

Linden, Inc. uses a 6,900 square foot factory space that it rents for $3,500 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. 3,100 square feet of the factory are used for machining, while 1,400 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

Answer: $710.14

Step-by-step explanation:

Out of the total space of 6,900 square foot, Preparation and Setup uses 1,400 out of this.

Rent is $3,500

The total rent to be apportioned to it will therefore be;

= 1,400/6,900 * 3,500

= $710.14