The following indirect costs were incurred in a manufacturing company.Factory cleaning $25,000Heat and Light $68,000The company has three cost centres, A, B and C, which occupy 15,000 sq m, 20,000 sq m and 25,000 sq m, respectively.Assuming that the basis of apportionment is floor area, what is the total indirect cost apportioned to cost centre C?*2 points$31,000$38,750$23,250$93,000
Question
The following indirect costs were incurred in a manufacturing company.Factory cleaning 68,000The company has three cost centres, A, B and C, which occupy 15,000 sq m, 20,000 sq m and 25,000 sq m, respectively.Assuming that the basis of apportionment is floor area, what is the total indirect cost apportioned to cost centre C?*2 points38,75093,000
Solution
To solve this problem, we first need to calculate the total indirect costs and the total floor area.
The total indirect costs are the sum of the factory cleaning cost and the heat and light cost, which is 68,000 = $93,000.
The total floor area is the sum of the floor areas of cost centres A, B, and C, which is 15,000 sq m + 20,000 sq m + 25,000 sq m = 60,000 sq m.
Next, we need to determine the proportion of the total floor area that cost centre C occupies. This is 25,000 sq m / 60,000 sq m = 0.4167 (rounded to four decimal places).
Finally, we multiply the total indirect costs by the proportion of the total floor area that cost centre C occupies to find the total indirect cost apportioned to cost centre C. This is 38,751.10.
So, the closest answer to the total indirect cost apportioned to cost centre C is $38,750.
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