Marathon Running Shop has two service departments (advertising and administrativ

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 Square Feet Advertising Administrative Shoes Clothing Expenses $15,000 24,000 102,000 10,000 770 1,320 4,620 4,290 The advertising department developed and distributed 150 advertisements during the year. Of these, 15 promoted shoes and 135 promoted clothing. The store sold $370,000 of merchandise during the year. Of this amount, $273,800 is from the shoes department, and $96,200 is from the clothing department. The utilities expense of $50,000 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 $50,000 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

Utilities

Advertising

Administrative

Departmental Expense Allocation Spreadsheet

Utilities Allocation Base Percent of Allocation Base Cost to be
Allocated Allocated Cost Department: Floor space occupied Numerator Denominator % of Total Advertising Floor space occupied 770 11000 7% $50000 $3500 Administrative Floor space occupied 1320 11000 12% 50000 6000 Shoes Floor space occupied 4620 11000 42% 50000 21000 Clothing Floor space occupied 4290 11000 39% 50000 19500 Floor space occupied 100.0% $50000

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