Marathon Running Shop has two service departments (advertising and administrativ
ID: 2430563 • Letter: M
Question
Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). The table that follows shows the direct expenses incurred and square footage occupied by all four departments, as well a total sales for the two operating departments for the year 2017 Direct Expenses 20,000 Square Sales Department Advertising Administrative 30,000 Shoes Clothing Feet 1,680 1,260 10,290 $179,800 128,000 19,000 7,770 130,200 The advertising department developed and distributed 130 advertisements during the year. Of these, 26 promoted shoes and 104 promoted clothing. Utilities expense of $75,000 is an indirect expense to all departments Complete a departmental expense allocation spreadsheet for Marathon Running Shop. The spreadsheet should assign (1) expenses to occupied, (3) the advertising department's expenses to the two operating departments on the basis of t promoted a department's products, and (4) the administrative department's expenses to the two operating departments based on amount of sales each of the four departments, (2) the $75,000 of utilities expense to the four departments on the basis of floor space the Cost to be Allocated Allocated Cost Utilities Allocation Base Numerator Denominator% of Total Department AdvertisingExplanation / Answer
Utilities Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Floor Space Numerator Denominator % of Total Advertising 1680 1680 21000 8% 75000 6000 Administrative 1260 1260 21000 6% 75000 4500 Shoes 10290 10290 21000 49% 75000 36750 Clothing 7770 7770 21000 37% 75000 27750 Totals 21000 75000 Advertising Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Number of Ads Numerator Denominator % of Total Shoes 26 26 130 20% 20000 4000 Clothing 104 104 130 80% 20000 16000 Totals 130 20000 Administrative Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Amount of sales Numerator Denominator % of Total Shoes 179800 179800 310000 58% 30000 17400 Clothing 130200 130200 310000 42% 30000 12600 Totals 310000 30000 MARATHON RUNNING SHOP Departmental Expense Allocation Spreadsheet For Year Ended December 31, 2017 Expense Totals Advertising Administrative Shoes Clothing Direct expense 197000 20000 30000 128000 19000 Indirect utilities expenses 75000 6000 4500 36750 27750 Total dept. exp. 272000 26000 34500 164750 46750 Service Dept. Expenses Advertising Dept. 20000 -20000 0 4000 16000 Administrative Dept. 30000 0 -30000 17400 12600 Total expenses allocated 50000 -20000 -30000 21400 28600