Marathon Running Shop has two service departments (advertising and administrativ
ID: 2557347 • 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 Department Advertising Administrative Shoes Clothing Square Feet Expenses 5 15,000 27,000 103,000 13,000 500 4,100 4,700 The advertising department developed and distributed 190 advertisements during the year. Of these, 38 promoted shoes and 152 promoted clothing. The store sold 5310,000 of merchandise during the year. Of this amount $124,000 is from the shoes department, and 5188,000 is from the clothing department. The utilities expense of $74,000 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 $74,000 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 ofExplanation / Answer
Req 1 Utilities Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Advertising 500 500 10000 5% 74000 3700 Admin 700 700 10000 7% 74000 5180 Shoes 4100 4100 10000 41% 74000 30340 Clothing 4700 4700 10000 47% 74000 34780 Total 10000 10000 10000 100% 74000 Advertising Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Shoes 38 38 190 20% 18700 3740 Clothing 152 152 190 80% 18700 14960 Total 190 190 190 100% 18700 Administrative Allocation Percent f Allocation * Indirect Cost Allocated Cost Base Numerator Denominator % of Total Department Shoes 124000 124000 310000 40% 32180 12872 Clothing 186000 186000 310000 60% 32180 19308 Total 310000 310000 310000 100% 32180 Statement showing indirect cost assigned: Expense Advertising Admin Shoes Clothin Total Direct expense 158000 15000 27000 103000 13000 Indirect Utilities 74000 3700 5180 30340 34780 Total Deptt expense 232000 18700 32180 133340 47780 Service deptt. Expense Advertissing -18700 3740 14960 Admin -32180 12872 19308 Total Expense Allocated 232000 0 0 149952 82048