Calico Company has two operating departments: Department A and Department B. Department A occupies 30% of the floor space of the company but accounts for 75% of the sales of the company. Department B occupies 70% of the floor space of the company but accounts for 25% of company sales.

 Calico Company has two operating departments: Department A and Department B. Department A occupies 30% of the floor space of the company but accounts for 75% of the sales of the company. Department B occupies 70% of the floor space of the company but accounts for 25% of company sales. Cleaning expense (an indirect expense of the company), which consists primarily of vacuuming the carpet is $30,000 each year. How much cleaning expense should be allocated to Department B?

multiple choice
$0
$7,500
$9,000
$21,000 Correct

Explanation
Knowledge Check 01
 
Maintenance and cleaning expenses are commonly allocated based on the number or percentage of square feet of floor space occupied. Using the percentage of floor space as the base, the cleaning expense allocated to Department B = cleaning expense of $30,000 × percent of total square footage occupied by Department B of 70% = $21,000.