1. Marian Corporation has two separate divisions that operate as profit centers.

Question

1. Marian Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year:

The Black Division occupies 20,000 square feet in the plant. The Navy Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. Compute gross profit for the Black and Navy Divisions, respectively.

2.

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:

The amount of salaries that should be allocated to Grinding for the current period is:

Black Division Navy Division Sales (net) $ 200,000 $ 400,000 Salary expense 28,000 48,000 Cost of goods sold 100,000 159,000

Explanation / Answer

1. The  gross profit for the Black and Navy Divisions :

Gross Profit = Sales - Cost of Goods Sold

2.

The amount of salaries that should be allocated to Grinding for the current period is =

= Number of Employees in Grinding Department * Activity rate

= 1,500 Employees * $ 12 Per Employee

= $ 18,000

Hence the correct answer is $ 18,000

Black Division Navy Division Sales (net) 2,00,000 4,00,000 Cost of goods sold 1,00,000 1,59,000 Gross Profit 1,00,000 2,41,000

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