Assigning Traceable Fixed Expenses Selected data for Colony Company, which opera
ID: 2514976 • Letter: A
Question
Assigning Traceable Fixed Expenses
Selected data for Colony Company, which operates three departments, follow:
During the year, the company's fixed expenses included the following:
Assume that the property tax rate is the same for both inventory and equipment. Using the most causally related bases, prepare a schedule assigning the fixed expenses to the three departments. Hint: Not all fixed expenses are traceable to the three departments. One of these fixed costs should be considered a common cost and not traceable to the departments.
Do not round until your final answer. Round final answer to the nearest whole number.
Department A Department B Department C Inventory $60,000 $216,000 $84,000 Equipment (average cost) $540,000 $324,000 $216,000 Payroll $607,500 $540,000 $202,500 Square feet of floor space 27,000 13,500 4,500Explanation / Answer
Depreciation on equipment will be allocated to three departments on the basis of cost of equipment, real estate taxes will be allocated on the basis of Square feet of floor space and personal property taxes will be allocated on the basis of sum of inventory and equipment cost. The personnel department expenses will not be allocated and should be considered as common cost and not traceable to the departments.
Total Equipment cost = $540,000+$324,000+$216,000 = $1,080,000
Total Inventory = $60,000+$216,000+$84,000 = $360,000
Total Equipment and Inventory = $1,080,000+$360,000 = $1,440,000
Total square feet of floor space = $27,000+13,500+4,500 = 45,000
Dept. A inventory and Equipment = $60,000+$540,000 = $600,000
Dept. B inventory and Equipment = $216,000+$324,000 = $540,000
Dept. C inventory and Equipment = $84,000+$216,000 = $300,000
Allocation of Fixed Expenses (Amounts in $)
Particulars Department A Department B Department C Depreciation $90,000*(540,000/1,080,000) = 45,000 $90,000*(324,000/1,080,000) = 27,000 $90,000*(216,000/1,080,000) = 18,000 Real Estate Taxes $27,000*(27,000/45,000) = 16,200 $27,000*(13,500/45,000) = 8,100 $27,000*(4,500/45,000) = 2,700 Personal Property Taxes $43,200*(600,000/1,440,000) = 18,000 $43,200*(540,000/1,440,000) = 16,200 $43,200*(300,000/1,440,000) = 9,000 Personnel dept. expenses 0 0 0