Question

Smith Company has two operating departments: Assembly and Fabricating. Assembly has 150 employees and occupies 44,000...

Smith Company has two operating departments: Assembly and Fabricating. Assembly has 150 employees and occupies 44,000 square feet. Fabricating has 100 employees and occupies 36,000 square feet. Indirect factory expenses include \$80,000 for administration and \$100,000 for maintenance.

Administration is allocated based on the number of workers in each department, and maintenance is based on square footage. Determine the total amount of indirect factory expenses that should be allocated to the Assembly Department and to the Fabricating Department.

 Ans. Assembly Fabricating Total Administrative 48000 32000 80000 Maintenance 55000 45000 100000 Total indirect expenses 103000 77000 180000 *Calculations: Assembly Fabricating Administrative 80000 / (150+100) * 150 80000 / (150+100) * 100 Maintenance 100000 / (44000+36000) * 44000 100000 / (44000+36000) * 36000 *The calculation is based on ratios. Total administrative expesnes is distributed on the basis of the ratio of employees in each department. Total maintenance expesnes is distributed on the basis of the ratio of square feet in each department.

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