8.33 polnts Exercise 9-2 Departmental expense allocation-spreadsheet LO P2 Marat

Question

8.33 polnts Exercise 9-2 Departmental expense allocation-spreadsheet LO P2 Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing) During 2015, the departments had the following direct expenses and occupied the following amount of floor space Department Square Feet 5 11,000 20,000 132,000 19,000 770 Advertising Administrative Shoes Clothing 1,100 5,280 3.850 The advertising department developed and distributed 160 advertisements durng the year Of these. 32 promoted shoes and 128 promoted clothing The store sold $220,000 of merchandise during the year Of this amount, $114,400 is from the shoes department, and $105,600 is from the clothing department. The utilities expense of $75,000 is an indirect expense to all departments is an indirect expense to all depatments Complete a depatmental expense allocation spreadsheet for Marathon Running Shop. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) the $75,000 of utilities expense to the four departments on the basis of floor space occupied, (3) the advertising department's expenses to the two operating departments on the basis of the number of ads placed that promoted a department's products, and (4) the administrative department's expenses to the two operating departments based on the amount of sales Utilities Allocation Base to beAllocated Cost Allocated Department Floor space occupied Numerator | Denominator % ofTotal Advertising Administrative Shoes Clothing 1.100 5.280 3,850 11.000 Totals

Explanation / Answer

Utilities Allocation Base Percent of Allocation Base Cost to be allocated Allocated cost Department Floor space occupied Numerator Denominator % to Total Advertising 770 770/ 11000 7% 75000 5250 Administration 1100 1100/ 11000 10% 75000 7500 Shoes 5280 5280/ 11000 48% 75000 36000 Clothing 3850 3850/ 11000 35% 75000 26250 Totals 11000 100% 75000 Advertising Allocation Base Percent of Allocation Base Cost to be allocated Allocated cost Department No.of Ads Numerator Denominator % to Total Shoes 32 32/ 160 20% 16250 3250 Clothing 128 128/ 160 80% 16250 13000 Totals 160 100% 16250 Administrative Allocation Base Percent of Allocation Base Cost to be allocated Allocated cost Department Sales Numerator Denominator % to Total Shoes 114400 114400/ 220000 52% 27500 14300 Clothing 105600 105600/ 220000 48% 27500 13200 Totals 220000 100% 27500 Marathon Running Shop Departmental Expense Allocation Spreadsheet For The Yr. ended Dec.31,2015 Expense Totals Advertising Admn. Shoes Clothing Direct Expense 182000 11000 20000 132000 19000 Indirect utilities exp. 75000 5250 7500 36000 26250 Total dept. exp. 257000 16250 27500 168000 45250 Service dept. exp. Advertising dept. 0 -16250 3250 13000 Admn. 0 -27500 14300 13200 Totals 257000 0 0 185550 71450

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