Question

Mervon Company has two operating departments: mixing and bottling.

Mixing has 300 employees and Bottling has 200 employees.

Indirect factory costs include administrative costs of $160,000.

Administrative costs are allocated to operating departments based on the number of workers.

Determine the administrative costs allocated to each operating department.

Answer 1

Answer:

Administrative costs allocated to Mixing: $96,000;

Administrative costs allocated to Bottling: $64,000.

Explanation:

Total number of employees = Number of employees in Mixing + Number of employees in Bottling = 300 + 200 = 500 employees.

Number of administrative cost allocation per 01 employees = 160,000 / 500 = $320 per employees.

Administrative costs allocated to Mixing = Number of administrative cost allocation per 01 employees x Number of Employees in Mixing = 320 x 300 = $96,000

Administrative costs allocated to Bottling = Number of administrative cost allocation per 01 employees x Number of Employees in Bottling = 320 x 200 = $64,000.