Question

A company has two departments, Y and Z that incur delivery expenses. An analysis of the total delivery expense of $9,000 indicates that Dept. Y had a direct expense of $1,000 for deliveries and Dept. Z had no direct expense. The indirect expenses are $8,000. The analysis also indicates that 40% of regular delivery requests originate in Dept. Y and 60% originate in Dept. Z. Departmental delivery expenses for Dept. Y and Dept. Z, respectively, are:
A. $4,500; $4,500.

B. $4,200; $4,800.

C. $5,500; $3,500.

D. $4,800; $4,200.

E. $5,400; $3,600.

Answer 1

Answer:

B) $4,200; $4,800

Explanation:

total delivery expense = $9,000

                                                       Dept. Y                           Dept. X

direct expenses                             $1,000                                   $0*

indirect expenses             ($8,000 x 40%)               ($8,000 x 60%)

                                                      $3,200                           $4,800  

total delivery expenses               $4,200                            $4,800

*Since no direct delivery expenses were generated by Dept. X, no amount should be allocated. Indirect expenses are allocated based on the percent generated by each department.