Tools Pte Ltd has two operating (production) departments: Assembly and Fabricating. Assembly has 150 employees and occupies 4,400 square metre. Fabricating has 100 employees and occupies 3,600 square metre. Indirect factory expenses for the current period are as follows: Administration: $80,000 Maintenance: 100,000 Administration is allocated based on workers in each department; maintenance is allocated based on areas occupied. The total amount of indirect factory expenses that should be allocated to the Assembly Department for the current period is:

a. $48,000.
b. $55,000.
c. $103,000.
d. $104,000.
e. $110,000.

c. $103,000.

Total Assembly Indirect Expenses FOH =  $ 103,000

Explanation:

Tools Pte Ltd

Indirect FOH                            Assembly       Fabricating        Total

                                               Cost Driver       Cost Driver

Administration: $80,000        150                    100                  250

Maintenance: 100,000           4400                 3600              8000

Calculations

Indirect FOH                            Assembly       Fabricating        Total                                                      

Administration: $80,000       48,000              32000             $80,000    

Maintenance: 100,000           $ 55000             45000          100,000    

Total                                      $ 103,000           $ 77000

Working:

As administration is allocated based on workers in each department; maintenance is allocated based on areas occupied therefore the total amount in each department will be allocated on the number of employees and the area occupied.It can be calculated as follows.

Administration Costs  Assembly    = ($80,000/ 250)*  150= $48,000  

Maintenance Costs  Assembly    =100,000/8000)*4400  = $ 55000                  

Total Assembly Indirect Expenses FOH =  $ 103,000      

Administration Costs  Fabricating     = ($80,000/ 250)*  100= $32,000  

Maintenance Costs   Fabricating    =100,000/8000)* 3600  = $ 45000                  

Total Assembly Indirect Expenses FOH =  $ 77,000                          

answer; lags, push the econ below the natural level of output;

answer; break-even analysis;