Condensed data taken from the departmental income statement for Nell and Company

ID: 2504215 • Letter: C

Question

Condensed data taken from the departmental income statement for Nell and Company are shown below. Miscellaneous selling expense is $3,500; insurance expense on merchandise is $3,000. Determine the apportionment of miscellaneous selling expense and insurance expense. Insurance expense on merchandise is apportioned on the basis of average inentories. Miscellaneous selling expense is apportioned on the basis of net sales.

Skate Departmnt Bike Department

Net Sales $122,000.00 $490,000.

Merchandise Inventory (beginning) 480,000 102,000

Merchandise Inventory (ending) 525,000 136,000

______ 1. The skate department's share of miscellaneous selling expense.

______ 2. The skate department's share of insurance expense.

______ 3. The bike department's share of miscellaneous selling expenses.

______ 4. The bike department's share of insurance expense.

Explanation / Answer

PARTICULARS

SKATE DEPARTMENT

BIKE DEPARTMENT

MISCELLANEOUS SELLING EXPENSE

[apportioned on the basis of net sales]

[122000/(122000+490000)] * 3500

= (122000/612000)* 3500

= $697.71

[49000/(122000+490000)] * 3500

= (490000/612000)* 3500

= $2802.29

INSURANCE EXPENSE

[apportioned on the basis of average inventories]

[502500/(502500+119000)] * 3000

= (502500/621500) * 3000

= $2425.58

[119000/(502500+119000)] * 3000

= (119000/621500) * 3000

= $574.42

NOTE:-

AVERAGE INVENTORY OF SKATE DEPARTMENT = (BEGGINNING INVENTORY + ENDING INVENTORY)/2

= (480000+525000)/2

= 502500

AVERAGE INVENTORY OF BIKE DEPARTMENT = (BEGGINNING INVENTORY + ENDING INVENTORY)/2

= (102000+136000)/2

= 119000