Question

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Purchasing Maintenance Fabrication Assembly Operating costs $ 44,000 $ 25,200 $ 108,000 $ 74,000 No. of purchase orders 16 4 Sq. ft. of space 3,900 2,100 Required: Compute the amount of Purchasing department expense to be allocated to Assembly

Answer 1

$8,800

Step-by-step explanation:

As per the data given in the question,

We can calculate the amount of Purchasing department expense to be allocated to Assembly by using following formula:

Purchasing department expense to be allocated to Assembly = Total cost for purchasing department × no. of purchasing order ÷ total no. of purchasing orders in all departments

= $44,000 × 4 ÷ 20

= $8,800

We simply applied the above formula to compute the amount of purchasing department expense.