Marks Corporation has two operating departments, Drilling and Grinding, and an o
ID: 2591162 • Letter: M
Question
Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Office Expenses Total Allocation Basis Salaries $ 47,000 Number of employees Depreciation 33,000 Cost of goods sold Advertising 67,000 Net sales Item Drilling Grinding Total Number of employees 2,000 3,000 5,000 Net sales $ 372,000 $ 558,000 $ 930,000 Cost of goods sold $ 136,800 $ 223,200 $ 360,000 The amount of the advertising cost that should be allocated to Grinding for the current period is:
Explanation / Answer
amount of advertising cost to be allocated to Grinding = total adveritising cost * (net sales of grinding / total net sales)
(since net sale is the allocation basis for advertising).
=>$67,000 * (558,000 / 930,000)
=>$40,200.
amount of advertising cost to be allocated to grinding = $40,200.