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3 May, 09:36

Tools Pte Ltd has two operating (production) departments: Assembly and Fabricating. Assembly has 150 employees and occupies 4,400 square metre. Fabricating has 100 employees and occupies 3,600 square metre. Indirect factory expenses for the current period are as follows: Administration: $80,000 Maintenance: 100,000 Administration is allocated based on workers in each department; maintenance is allocated based on areas occupied. The total amount of indirect factory expenses that should be allocated to the Assembly Department for the current period is:

a. $48,000.

b. $55,000.

c. $103,000.

d. $104,000.

e. $110,000.

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Answers (2)
  1. 3 May, 10:42
    0
    The correct option is C,$103,000

    Explanation:

    Apportionment of administration indirect expense:

    Assembly department=$80,000*150 / (150+100)

    Assembly department=$80,000*150 / (250) = $48,000

    Apportionment of maintenance indirect expense:

    Assembly department=$100,000*4,400 / (4,400+3,600)

    Assembly department=$100,000*4,400 / (8000) = $55,000

    Assembly department's portion of indirect admin. expense $48,000

    Assembly department's portion of indirect maint. expense $55,000

    Total indirect expenses of assembly department $103,000

    The total of indirect expenses apportioned to Assembly department is $103,000
  2. 3 May, 13:29
    0
    c. $103,000.

    Total Assembly Indirect Expenses FOH = $ 103,000

    Explanation:

    Tools Pte Ltd

    Indirect FOH Assembly Fabricating Total

    Cost Driver Cost Driver

    Administration: $80,000 150 100 250

    Maintenance: 100,000 4400 3600 8000

    Calculations

    Indirect FOH Assembly Fabricating Total

    Administration: $80,000 48,000 32000 $80,000

    Maintenance: 100,000 $ 55000 45000 100,000

    Total $ 103,000 $ 77000

    Working:

    As administration is allocated based on workers in each department; maintenance is allocated based on areas occupied therefore the total amount in each department will be allocated on the number of employees and the area occupied. It can be calculated as follows.

    Administration Costs Assembly = ($80,000 / 250) * 150 = $48,000

    Maintenance Costs Assembly = 100,000/8000) * 4400 = $ 55000

    Total Assembly Indirect Expenses FOH = $ 103,000

    Administration Costs Fabricating = ($80,000 / 250) * 100 = $32,000

    Maintenance Costs Fabricating = 100,000/8000) * 3600 = $ 45000

    Total Assembly Indirect Expenses FOH = $ 77,000
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