Advertising department expenses of $25,000 and purchasing department expenses of

Question

Advertising department expenses of $25,000 and purchasing department expenses of $56,200 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.

Advertising department expenses of $25,000 and purchasing department expenses of $56,200 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.

Explanation / Answer

Advertising Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Numerator Denominator % of Total Department Dollar Sales Sales of Deptt Total Sales % of Total Books Deptt 186200 186200 380000 49% 25000 12250 Magazine Deptt 95000 95000 380000 25% 25000 6250 Newspaper Deptt 98800 98800 380000 26% 25000 6500 TOTALS 380000 100% 25000 Purchasing Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Numerator Denominator % of Total Department Purchase orders Purchase orders Total Purch.Orders % of Total Books Deptt 546 546 1300 42% 56200 23604 Magazine Deptt 364 364 1300 28% 56200 15736 Newspaper Deptt 390 390 1300 30% 56200 16860 TOTALS 1300 100% 56200 Allocation Base Expense Balance Advert. Deptt Purchase Deptt Books Dept Magazine Deptt Newspapaer Deptt Total Department expense 624000 25000 56200 168500 124800 249500 Advertising Deptt 0 -25000 12250 6250 6500 Purchase deptt 0 -56200 23604 15736 16860 Total Expense Allocated 624000 0 0 204354 146786 272860

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