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Aldo Industries, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly). The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources.
The square footage occupied by each department follows.
Human Resources 6,000
Building Maintenance 13,000
Machining 18,000
Assembly 26,000
Problem 1: Assuming use of the direct method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?
Option 1: 44,000.
Option 2: More information is needed to judge.
Option 3: 63,000.
Option 4: 19,000.
Option 5: 50,000.
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