Marathon Running Shop has two service departments (advertising and administrativ
ID: 2557219 • Letter: M
Question
Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). During 2015, the departments had the following direct expenses and occupied the following amount of floor space. Direct Square Feet Administrative Shoes Clothing $ 19,000 22,000 118,000 14,000 650 1,170 4,550 6,630 The advertising department developed and distributed 120 advertisements during the year. Of these, 36 promoted shoes and 84 promoted clothing. The store sold $370,000 of merchandise during the year. Of this amount, $222,000 is from the shoes department, and $148,000 is from the clothing department. The utilities expense of $76,000 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 S76,000 of utilities expense to the four departments on the basis of floor space occupied, (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
Req 1 Utilities Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Advertising 650 650 13000 5% 76000 3800 Admin 1170 1170 13000 9% 76000 6840 Shoes 4550 4550 13000 35% 76000 26600 Clothing 6630 6630 13000 51% 76000 38760 Total 13000 13000 13000 100% 76000 Advertising Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Shoes 36 36 120 30% 22800 6840 6840 Clothing 84 84 120 70% 22800 15960 1596 Total 120 120 120 100% 22800 Administrative Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Shoes 222000 222000 370000 60% 28840 17304 17304 Clothing 148000 148000 370000 40% 28840 11536 11536 Total 370000 370000 3100000 100% 28840 Statement showing indirect cost assigned: Expense Advertising Admin Shoes Clothin Total Direct expense 173000 19000 22000 118000 14000 Indirect Utilities 76000 3800 6840 26600 38760 Total Deptt expense 249000 22800 28840 144600 52760 Service deptt. Expense Advertissing -22800 6840 15960 Admin -28840 17304 11536 Total Expense Allocated 249000 0 0 168744 80256