Advertising department expenses of $48,200 and purchasing department expenses of

Question

Advertising department expenses of $48,200 and purchasing department expenses of $40,200 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 $167,700 89,700 132,600 $390,000 1,232 756 812 Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments

Explanation / Answer

Advertising Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Sales Numerator Denominator % of Total Books Dept 167700 167700 390000 43% 48200 20726 Magazines Dept 89,700 89700 390000 23% 48200 11086 Newspapers Dept 1,32,600 132600 390000 34% 48200 16388 Totals 390000 100% 48200 Purchasing Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Number of orders Numerator Denominator % of Total Books Dept 1232 1232 2,800 44% 40200 17688 Magazines Dept 756 756 2,800 27% 40200 10854 Newspapers Dept 812 812 2,800 29% 40200 11658 Totals 2800 100% 40200 COZY BOOKSTORE Allocation of Expenses to Departments Allocation Base Expense Account Balance Advertising Dept. Purchasing Dept. Books Dept. Magazines Dept. Newspapers Dept. Total department expenses 803000 48200 40200 208800 160600 345200 Advertising Dept. Sales -48,200 20,726 11,086 16,388 Purchasing Dept. Purch. orders -40,200 17,688 10,854 11,658 Total expenses allocated to operating depts. 803000 0 0 247214 182540 373246

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