C ezto.mheducation.com/hm.tpx Exercise 9-2 Departmental expense allocation-sprea

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C ezto.mheducation.com/hm.tpx Exercise 9-2 Departmental expense allocation-spreadsheet LO P2 Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing) During 2015, the departments had the follomng direct expenses and occupied the following amount of floor space. Department Expenses Square Feet Advertising Administrative Shoes Clothing S 11,000 20,000 132.000 19,000 770 1,100 5,280 3,850 The advertising department developed and distributed 160 advertisements during the year Of these, 32 promoted shoes and 128 promoted clothing The store sold $220 000 of merchandise during the year of this amount, $114,400 is from the shoes department, and $105,600 is from the clothing department. The utilities expense of $75,000 is an indirect expense to all departments Complete a departmental expense allocation spreadsheet for Marathon Running Shop The spreadsheet should assign (1) drect expenses to each of the four departments?(2) the $75,000 of utilties 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 Utilities Cost to be Allocated Allocation Base tion Base Allocated Cost Department Floor space Numerator | Denominator | % of Total occupied Adeertising Administrative Shoes 1,100 5 280 3 850 11,000 ing Totals Advertising Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost

Explanation / Answer

Utilities Allocation base % of allocation base Cost to be Allocated Allocated cost Department Floor space occupied Numerator Denominator % of total Advertising 770 770 11000 7.00% 75000 5250 Administrative 1100 1100 11000 10.00% 75000 7500 Shoes 5280 5280 11000 48.00% 75000 36000 Clothing 3850 3850 11000 35.00% 75000 26250 Totals 11000 100.00% 75000 Advertising Allocation base % of allocation base Cost to be Allocated Allocated cost Department Number of ads Numerator Denominator % of total Shoes 32 32 160 20.00% 16250 3250 Clothing 128 128 160 80.00% 16250 13000 Totals 160 100.00% 16250 Administrative Allocation base % of allocation base Cost to be Allocated Allocated cost Department Sales Numerator Denominator % of total Shoes 114400 114400 124960 91.55% 27500 25176 Clothing 10560 10560 124960 8.45% 27500 2324 Totals 124960 100.00% 27500 Departmental expense allocation Spreadsheet Expense Totals Advertising Administrative Shoes Clothing Direct expense 182000 11000 20000 132000 19000 Indirect utilities expense 75000 5250 7500 36000 26250 Total department expense 257000 16250 27500 168000 45250 Service department expenses: Advertising -16250 3250 13000 Administrative -27500 25176 2324 Total expenses allocated 257000 0 0 196426 60574

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