Texas Toys, a retail store, has four sales departments supported by three servic
ID: 2455964 • Letter: T
Question
Texas Toys, a retail store, has four sales departments supported by three service departments. Cost and operational data for each department follow:
Purch.
Sales Cost of Square Orders
Department Sales Goods Sold Footage Issued
1......
$92,160
$36,864
1,728
1,260
2......
69,120
32,832
3,024
1,680
3......
80,640
32,256
1,296
2,310
4......
46,080
27,648
2,592
1,750
Service
Departments
Allocation Basis
Cost
Advertising………..
Sales
$10,000
Maintenance………
Square footage
6,900
Purchasing………...
No. of purchase orders issued
12,000
Determine the service department expenses to be allocated to Sales Departments 1 - 4 for:
Advertising
Maintenance
Purchasing
1......
$92,160
$36,864
1,728
1,260
2......
69,120
32,832
3,024
1,680
3......
80,640
32,256
1,296
2,310
4......
46,080
27,648
2,592
1,750
Service
Departments
Allocation Basis
Cost
Advertising………..
Sales
$10,000
Maintenance………
Square footage
6,900
Purchasing………...
No. of purchase orders issued
12,000
Explanation / Answer
Total sales $288000, allocation on the basis of sales of $10000 of Advertising expense,
Sales % of total sales $ allocation ofAdv Exp
Dept 1 92160 32 3200
Dept-2 69120 24 2400
Dept-3 80640 28 2800
Dept-4 46080 16 1600
Allocation of Maintenance expense on the basis of square footage:
Sq Ft % Sq ft $ Allocation of maintenance cost
Dept -1 1728 20 6900*0.2 = 1380
Dept-2 3024 35 6900*.35 = 2415
Dept-3 1296 15 6900*.15 = 1035
Dept-4 2592 30 6900*.3 = 2070
Allocation of P.O expenses based on total number of P.Os - 7000
No. of POs % of PO of total $ Allocation of the total of $12000 on POs
Dept-1 1260 18 2160
Dept-2 1680 24 2880
Dept-3 2310 33 3960
Dept-4 1750 25 3000
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