VelCraft Allocates Costs from Its Payroll Department and the Maintenance

question 71

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: $$\begin{array} { l c c c } \text { Denartment } & \text { Costs } & \begin{array} { c } \text { Number of } \\\text { Emplovees }\end{array} & \begin{array} { c } \text { Number of Square } \\\text { Eeet Occupied }\end{array} \\\hline\text { Payroll } & \$ 150,000 & 2 & 2,000 \\\text { Maintenance } & \$ 220,000 & 8 & 64,000 \\\text { Molding } & & 75 & 100,000 \\\text { Finishing } & & 50 & 60,000 \\\text { Packaging } & & 25 & 40,000\end{array}$$ When the maintenance department costs are allocated, what amount will be charged to the packaging department? (Round your intermediate calculation to two decimal places)

• A) $44,000
• B) $33,083
• C) $70,400
• D) $52,932

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Definitions:

Unity of Command

A principle in management and organization theory stating that each employee should receive orders from and be accountable to only one supervisor.

Boundary-spanning

Involves activities or roles that connect an organization with its external environment, facilitating information flow and coordination between internal and external stakeholders.

Hierarchical Differentiation

The extent to which an organization or system is divided into levels of authority or ranks, creating a hierarchy.

Vertical Specialization

Pertains to the degree of stratification or hierarchy within an organization's structure, where tasks and responsibilities are distinctly defined at different levels.