Mervon Company has two operating departments: mixing and bottling. Mixing occupies 27,235 square feet. Bottling occupies 14,665 square feet. Indirect factory costs include maintenance costs of $246,000. If the maintenance costs are allocated to operating departments based on square footage occupied, determine the amount of maintenance costs allocated to each operating department.

The amount of maintenance costs allocated to each operating department is $159,900 to mixing and $86,100 to bottling

Explanation:

In order to determine the amount of maintenance costs allocated to each operating department we would have to calculate first the percentage of area for each deparment as follows:

Particular Area in square feet %

mixing 27,235 65

bottling 14,665 35

Total Area 41,900 100

Therefore, if the maintentance cost is $246,000, the amount of maintenance costs allocated to each operating department is as follows:

Particular % Allocation of expense

mixing 65 159,900=246,000*65/100

bottling 35 86,100=246,000*35/100

100 246,000