Question

The Maryville Construction Company occupies 86,300 square feet for construction of mobile homes. There are two manufacturing departments, finishing and assembly, and four service departments labeled S1, S2, S3, and S4. Information relevant to Maryville is as follows: Allocation | Department Area used sis2 | 53 | 54 |Finishing | Assembly si 17,100 --- 10.20 0.10 --- 0.10 0.60 S2 4,300 --- --- 0.20 0.20 --- 0.60 8,600 0.10 0.10 --- 0.40 0.10 10.30 S4 4,300 10.30 0.20 0.30 --- 0.10 0.10 Finishing 23,400 --- --- --- --- --- Assembly 28,600 --- --- --- --- --- S3 Rent paid for the area used is $721,000. How much rent is allocable to the assembly department using the direct method of allocation? Multiple Choice $396,550. $551,203. Oo oo $324,450. $238,941.

Answer 1

Answer

• Method to be used: Direct Method
• Total Square feet to be considered = 86,300 sq feet
• Sq feet used by Assembly Department = 28,600 sq feet
• Rent to be allocated to Assembly Department = $ 721,000 x (28600 / 86300)
  = 721000 x 28600 / 86300
  = $ 238,941
• Correct Answer = Option #4: $ 238,941