Advertising and purchasing department expenses of Cozy Bookstore are allocated t

Question

Advertising and purchasing department expenses of Cozy Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Advertising and purchasing department expenses of Cozy Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Explanation / Answer

All Amounts in $ Advertising Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Department Numerator Denominator % of Total 24000 Books Dept 495000 900000 55% 13200 Magazines Dept 198000 22% 5280 Newspapers Dept 207000 23% 5520 Totals 900000 900000 100% 24000 Purchasing Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Department Numerator Denominator % of Total 34000 Books Dept 516 1200 43% 14620 Magazines Dept 360 30% 10200 Newspapers Dept 324 27% 9180 Totals 1200 1200 100% 34000 COZY BOOKSTORE Departmental Expense Allocation Spreadsheet Expense Totals Advertising Purchasing Books Magazines Newspapers Total dept. exp. 6,98,000 24,000 34,000 4,25,000 90,000 1,25,000 Service Dept. Expenses -58,000 -24000 -34000 Advertising Dept. 24,000 13200 5280 5520 Purchasing Dept. 34,000 14620 10200 9180 Total expenses allocated 698000 0 0 452820 105480 139700

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