Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:
Administration $ 80,000
Maintenance $ 100,000
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Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of administration expenses that should be allocated to the Painting Department for the current period is:
A) $ 48,000.
B) $ 32,000.
C) $ 55,000.
D) $103,000.
E) $110,000.

Question

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:
 Administration $ 80,000
Maintenance $ 100,000
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Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of administration expenses that should be allocated to the Painting Department for the current period is:
A) $ 48,000.
B) $ 32,000.
C) $ 55,000.
D) $103,000.
E) $110,000.

Quizplus · Accepted Answer

To allocate administration expenses, we will use the number of workers in each department. The total number of workers in both departments is 250 (150 in Assembly + 100 in Painting). Therefore, Assembly's share of the administration expenses is (150/250) * $80,000 = $48,000. Thus, Painting's share of the administration expenses would be (100/250) * $80,000 = $32,000. So, the correct answer is B.

Ready Company Has Two Operating (Production) Departments: Assembly and Painting