Please include the explanations . Thank you. Bridgestreet, Inc. has three operat
ID: 2424524 • Letter: P
Question
Please include the explanations. Thank you.
Bridgestreet, Inc. has three operating departments: Cutting, Assembling, and Finishing. Cutting has 6,000 employees and occupies 18,600 square feet. Assembling has 4,800 employees and occupies 14,400 square feet. Finishing has 1, 200 employees and occupies 29,000 square feet. Indirect factory costs for the current period were Administrative $230, 000 and Maintenance $287,500. 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. Based on the preceding data, determine the administrative cost allocated to each operating department of Bridgestreet, Inc.Explanation / Answer
Answer is OPTION D
Explanation:-
There are 3 Departments Cutting, Assembling and Finishing.
We are required to allocate administrative cost i.e. $230,000
The question states that administrative cost is to be allocated in the ratio of the employees in the department.
Thus, it will be allocated in the ration of 6000:4800:1200
Further simplifying the ratio we get (i.e. by dividing by 1200)
5:4:1 [ 6000/1200=5, 4800/1200=4, 1200/1200=1]
Lets now distribute the administrative cost $230000 in the ratio of 5:4:1
5+4+1= 10
therefore, Cutting Department has 6000 employees, hence, will be allocated (230000/10*5 =) $115,000
Assembling Department has 4800 employees, hence, will be allocated (230000/10*4=) $92,000
Finishing Department has 1200 employees, hence, will be allocated (230000/10*1=) $23,000