Marks Corporation has two operating departments, Drilling and Grinding, and an o
ID: 2485241 • Letter: M
Question
Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Office Expenses Total Allocation Basis Salaries $30,000 Number of employees Depreciation 20,000 Cost of goods sold Advertising 40,000 Net sales Item Drilling Grinding Total Number of employees 1,000 1,500 2,500 Net sales $325,000 $475,000 $800,000 Cost of goods sold $75,000 $125,000 $200,000 The amount of the total office expenses that should be allocated to Grinding for the current period is:
Explanation / Answer
Grinding office allocation =
Salaries = $30000/2500*1500 = $18000
Depreciation = $20000/$200000*$125000 = $12500
Advertising = $40000/$800000*$475000 = $23750
Total office expenses allocated to grinding department = $18000+$12500+$23750 = $54250