VelCraft Allocates Costs from Its Payroll Department and the Maintenance

question 142

Multiple Choice

VelCraft allocates costs from its payroll department and the maintenance department to its production departments using the direct method of allocation. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet that the production department occupies within the factory. Information about the departments is presented below: $\begin{array}{lrrr}&&\text { Number of } & \text { Number of Square } \\\text { Department }&\text { Costs }&\text { Emblovees } & \text { Eeet Occupied }\\\hline\text { Payroll } & \$ 150,000 & 2 & 2,000 \\\text { Maintenance } & \$ 220,000 & 8 & 64,000 \\\text { Molding } & & 75 & 100,000 \\\text { Finishing } & & 50 & 60,000 \\\text { Packaging } & & 25 & 40,000\end{array}$ What amount of the payroll department costs will be allocated to the molding department?

• A) $70,313
• B) $185,000
• C) $75,000
• D) $132,353

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Definitions:

Lockbox System

A service provided by banks to companies for the collection of payments from customers, involving the use of a special post office box to speed up the deposit process.

Treasury Bills

Short-term government securities issued at a discount from the face value and mature in a year or less, used to raise funds and manage the money supply.

Weekly Disbursements

Regular payments or expenditures made by an organization or individual within a one-week period, often related to operational costs.