The Cost of the Maintenance Department at Forest Manufacturing Has

Essay

The cost of the Maintenance Department at Forest Manufacturing has always been charged to the production departments based on the number of employees.Recently,an activity analysis of possible cost drivers was performed which indicated that the square feet of space may also be a predictor of costs to be assigned to each production department.The Maintenance Department cost is $500,000.The following data is available:
$\begin{array}{llll}&\text { Production Departments }\\&\text { Dept. A }&\text { Dept. B }&\text { Dept. C }\\\text { Number of Employees } & 300 & 25 & 50 \\\text { Square Feet of Space } & 5,000 & 10,000 & 25,000\end{array}$
Required:
1.Determine the amount of the maintenance department cost that should be allocated to Department A and Department B if the cost driver used is: (A)number of employees and (B)square feet of space.
2.Does the choice of the cost driver affect the costs assigned to each department?