Medusa Company allocates costs from the payroll department (S1) and the maintena
ID: 3156682 • Letter: M
Question
Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory. Information about the departments is presented below: Number of Number of Square Department Costs Employees Feet Occupied Payroll (S1) $142,000 2 2,000 Maintenance (S2) $220,000 8 64,000 Molding (P1) 75 100,000 Finishing (P2) 40 60,000 Packaging (P3) 23 40,000 Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar. What amount of the payroll department costs will be allocated to the molding department?
Explanation / Answer
As per the information given, the payoff department has Cost = $142,000 for the Employees = 22000
So, the cost per employee to be given by the Payoff dept.= $142000/22000 = $6.454545
The maintenance department has a budget of $220,000 for 864000 Square feet.
So, the cost per Square feet = $220000/864000 = 0.25463
The molding Department has 75 employees and occupies square feet = 100000
The payoff Department has to pay for its employee = $75*6.454545 = $484.0909; and the Maintenance Deprt has to pay for the square feet = $100000*0.25463 = $25463.