The Merchant Manufacturing Company has two service departments — purchasing and
ID: 2454282 • Letter: T
Question
The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production departments — fabrication and assembly. The distribution of each service department's efforts to the other departments is shown below:
FROM TO
Purchasing Maintenance Fabrication Assembly
Purchasing 0% 60% 10% 30%
Maintenance 20% 0% 30% 50%
The direct operating costs of the departments (including both variable and fixed costs) were as follows:
Purchasing $96,000
Maintenance 18,000
Fabrication 72,000
Assembly 48,000
The total cost allocated to the assembly department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):
$54,750.
$66,600.
$37,800.
$83,250.
$54,750.
$66,600.
$37,800.
$83,250.
Explanation / Answer
Total Purchasing Maintenance Fabrication Assembly
Purchasing $96,000 $0 $57,600 $9,600 $28,800
Maintenance $18,000 $3,600 $0 $5,400 $ 9,000
Fabrication $72,000 $0 $0 $72000 $0
Assembly $48,000 $0 $0 $0 $48,000
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Total $2,34,000 $3,600 $57,600 $87,000 $85,800
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The total cost allocated to Assembly department is therefore $85,800 .None of the options is, therefore,correct.