Examkin

Question

Difficulty: EasyAllocation and Apportionment of Expenses among Departments

Lumina Stores operates two departments: Assembly and Packaging. During the trading year, total canteen expenses incurred amounted to ₦50,000₦50,000. Assembly employs 3030 workers, while Packaging employs 2020 workers. What is the amount of canteen expenses to be apportioned to the Packaging department?

  1. A
    ₦30,000
  2. ₦20,000Answer
  3. C
    ₦25,000
  4. D
    ₦50,000

Answer

The amount of canteen expenses apportioned to the Packaging department is ₦20,000.
Canteen expenses are an indirect staff-related cost and are equitably apportioned using the number of employees in each department. The total number of employees is 30+20=5030 + 20 = 50. Packaging's share is calculated as 2050×₦50,000=₦20,000\frac{20}{50} \times ₦50,000 = ₦20,000.

Step-by-Step Solution

1
Identify the total expense and the appropriate basis of apportionment.
Total canteen expense = ₦50,000₦50,000. Standard basis for canteen expenses is the number of employees.
Canteen expenses benefit employees directly, so employee headcount provides an equitable distribution.
2
Calculate total employee count and the proportion for the Packaging department.
Total employees = 30+20=5030 + 20 = 50. Packaging ratio = 2050=25\frac{20}{50} = \frac{2}{5}.
Determining the fractional share of Packaging relative to the business total.
3
Multiply the fraction by total canteen expenses.
Packaging share = 2050×₦50,000=₦20,000\frac{20}{50} \times ₦50,000 = ₦20,000.
Calculates the monetary expense charged to the Packaging departmental profit and loss account.

Key Concept

Apportionment of indirect staff expenses based on departmental headcount
Rate this question

Topics

Allocation and Apportionment of Expenses among Departments

More questions from this topic