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Brownley Company has two service departments and two operating (production) departments. The Payroll Department services all...

Brownley Company has two service departments and two operating (production) departments. The Payroll Department services all three of the other departments in proportion to the number of employees in each. The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each. Listed below are the operating data for the current period:

Service Depts. Production Depts.
Payroll Maintenance Cutting Assembly
Direct costs $ 29,400 $ 34,500 $ 85,500 $ 114,400
No. of personnel 24 24 72
Sq. ft. of space 10,900 15,900


The total cost of operating the Maintenance Department for the current period is:

Multiple Choice

  • $19,680.

  • $22,303.

  • $34,500.

  • $40,380.

  • $33,303.

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Answer #1

Cost of operating maintenance department

= Direct Cost + Payroll cost allocated

= 34,500 + (29,400/120)*24

= 34,500 + 5880

= 40,380

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