Question

Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Department 2's contribution to overhead in dollars is:

Dept.		Sales			Cost of Goods Sold					Direct Expenses					Indirect Expenses
1		$	2,500,000			$	1,750,000				$	250,000				$	200,000
2			1,000,000				375,000					100,000					250,000
3			1,750,000				750,000					375,000					50,000

Multiple Choice

$525,000.

$875,000.

$25,000.

$650,000.

$375,000.

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 140 employees and occupies 49,200 square feet; Painting has 60 employees and occupies 32,800 square feet. Indirect factory expenses for the current period are as follows:

Administration	$	81,000
Maintenance	$	102,000

Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The total amount of indirect factory expenses that should be allocated to the Painting Department for the current period is:

Multiple Choice

$56,700.

$61,200.

$65,100.

$117,900.

$130,200.

Answer 1

Department 2's contribution to overhead in dollars = Sales - Cost of goods sold - Direct expenses

= $1,000,000 - $375,000 - $100,000

= $525,000

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Administration costs allocated to painting department = $81,000 * 60 / (140 + 60) = $24,300

Maintenance costs allocated to painting department = $102,000 * 32,800 (49,200 + 32,800) = $40,800

Total amount of indirect factory expenses allocated to the painting department = $24,300 + $40,800 = $65,100