Question

Riemer, Inc. has four departments. Information about these departments is listed below. Maintenance is a service department. If allocated maintenance cost is based on floor space occupied by each of the other departments, compute the amount of maintenance cost allocated to the Cutting Department. (Do not round your intermediate computations.)

	Maintenance			Cutting			Assembly			Packaging
Direct costs	$	18,000		$	21,000		$	61,000		$	36,000
Sq. ft. of space		900			1,400			2,400			3,400
No. of employees		10			10			10			10

Multiple Choice

• $3,500.

• $4,524.

• $3,169.

• $1,800.

• $18,000.

Answer 1

Answer:-

• Maintenance cost allocation is based on floor space occupied by each of the other departments.
• Floor space occupied by cutting department is 1400 sq. ft.
• Total floor space occupied by Cutting, Assembly and Packaging Department is 7,200 sq. ft. [1400+2400+3400]
• Total Maintenance Cost = $ 18,000
• Maintenance Cost to be allocated to Cutting Department = 18000*1400/7200 = $ 3,500

Hence Maintenance Cost to be allocated to Cutting Department is $ 3,500.