Advertising department expenses of $59,700 and purchasing department expenses of
ID: 2534834 • Letter: A
Question
Advertising department expenses of $59,700 and purchasing department expenses of $52,200 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 Sales Purchase Orders Department Books Magazines Newspapers Total $ 210,000 126,000 84,000 $ 420,000 602 322 476 1,400 Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments.Explanation / Answer
Cozy Bookstore
Table showing allocation of expenses of the two service departments (advertising and purchasing) to the three operating departments:
Advertising
Allocation Base
Percent of Allocation Base
Costs to be Allocated
Allocated Costs
Department
Sales
Numerator
Denominator
% of Total
Books
$210,000
$210,000
$420,000
50%
$59,700
$29,850
Magazines
$126,000
$126,000
$420,000
30%
$17,910
Newspapers
$84,000
$84,000
$420,000
20%
$11,940
Totals
$420,000
$59,700
The allocation of Advertising cost is done as follows,
For Magazines, $59,700 x 30% = $17,910
Purchasing
Allocation Base
Percent of Allocation Base
Costs to be Allocated
Allocated Costs
Department
Purchase Orders
Numerator
Denominator
% of Total
Books
602
602
1,400
43%
$52,200
$22,446
Magazines
322
322
1,400
23%
$12,006
Newspapers
476
476
1,400
34%
$17,748
Totals
1,400
$52,200
The allocation is done as follows,
$52,200 x 43% = $22,446 allocated to Books department.
Cozy Bookstore
Departmental Expenses Allocation Spreadsheet
Expenses Total
Advertising
Purchasing
Books
Magazines
Newspapers
Total departmental expenses
$746,000
$59,700
$52,200
$171,600
$149,200
$313,300
Service Departmental expenses
Advertising
$59,700
$29,850
$17,910
$11,940
Purchasing
$52,200
$22,446
$12,006
$17,748
Total expenses allocated
$746,000
0
0
$223,896
$179,116
$342,988
Advertising
Allocation Base
Percent of Allocation Base
Costs to be Allocated
Allocated Costs
Department
Sales
Numerator
Denominator
% of Total
Books
$210,000
$210,000
$420,000
50%
$59,700
$29,850
Magazines
$126,000
$126,000
$420,000
30%
$17,910
Newspapers
$84,000
$84,000
$420,000
20%
$11,940
Totals
$420,000
$59,700
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