Marathon Running Shop has two service departments (advertising and administrativ
ID: 2524721 • 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 occupled by all four departments as well as total sales for the two operating departments for the year 2017 Department Advertising Direct Expensessquare Feet sales $ 18,0ee 38,000 128,90e ??? 350 $238,9ee Shoes Clothing The advertising department developed and distributed 180 advertisements during the year. Of these, 54 promoted shoes and 26 promoted clothing. Utilities expense of $63,000 is an Indirect expense to all departments. Complete a departmental expense allocation spreadsheet for Marathon Running Shop. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) the $63,000 of utilities expense to the four departments on the basis of floor space occupled, (3) the advertising department's expenses to the two operating departments on the basis of the number of ads placed that promoted a department's products, and (4) the administrative department's expenses to the two operating departments based on the amount of sales.Explanation / Answer
Solution:
* Indirect cost for a department is cost other than the direct cost for that particular department.
Allocation of Utilities Expense Department Allocation Base Percentage of allocation base * Indirect Cost Allocated Cost Numerator Denominator % of Total Advertising Floor Space Occupied 300 5000 6.00% $63,000.00 $3,780.00 Administrative Floor Space Occupied 350 5000 7.00% $63,000.00 $4,410.00 Shoes Floor Space Occupied 2300 5000 46.00% $63,000.00 $28,980.00 Clothing Floor Space Occupied 2050 5000 41.00% $63,000.00 $25,830.00 Totals $63,000.00