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25 November, 09:44

Mervon Company has two operating departments: mixing and bottling. Mixing has 420 employees and Bottling has 280 employees. Indirect factory costs include administrative costs of $206,000. Administrative costs are allocated to operating departments based on the number of workers. Determine the administrative costs allocated to each operating department.

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  1. 25 November, 11:24
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    Mixing department = $123,600

    Bottling department = $82,400

    Explanation:

    The computation of the allocation of the administrative costs to each operating department is shown below:

    Mixing department = 420 employees

    Bottling department = 280 employees

    Total square feet = 700 employees

    Now the weightage would be

    Mixing department = Mixing department employees : Total employees

    = 420 : 700

    = 0.6

    And, for bottling department would be

    = Bottling department square feet : Total square feet

    = 280 : 700

    = 0.4

    Now the allocation would be

    Mixing department = $206,000 * 0.6 = $123,600

    Bottling department = $206,000 * 0.4 = $82,400
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