Question

Coconut Shop has an advertising and administrative departments (service departments) and shoes and clothing departments (two operating departments). The below table list the direct expenses incurred along with the square footage occupied by all the departments. The two operating departments' total sales for 2017 are included below.
  

Department	Direct Expenses				Square Feet				Sales
Advertising	$	19,000				650
Administrative		22,000				1,170
Shoes		118,000				4,550			$	222,000
Clothing		14,000				6,630				148,000

  
The advertising department developed and distributed 120 advertisements during the year. Of these, 36 promoted shoes and 84 promoted clothing. Utilities expense of $76,000 is an indirect expense to all departments.
  
Complete a departmental expense allocation spreadsheet for Coconut Shop. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) the $76,000 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 Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Advertising 0 Administrative 0 0 Shoes 0 0 Clothing 0 Totals 0 Advertising Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Shoes 0 Clothing 0 Totals 0 Administrative Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Shoes 0 Clothing 0 Totals 0 COCONUT SHOP Departmental Expense Allocation Spreadsheet For Year Ended December 31, 2017 Expense Totals Advertising Administrative Shoes Clothing Direct expense Indirect utilities expenses 0 Total dept. exp. 0 0 0 0 0 Service Dept. Expenses Advertising Dept. 0 Administrative Dept. 0 Total expenses allocated $0 $0 $0 $0 $0

Answer 1

Answers

[1]

Utilities	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Square feet
Advertising	Square feet	650	13000	5%	$76,000	$3,800
Administrative	Square feet	1170	13000	9%	$76,000	$6,840
Shoes	Square feet	4550	13000	35%	$76,000	$26,600
Clothing	Square feet	6630	13000	51%	$76,000	$38,760
Totals		13000		100%		$76,000
Advertising	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	No. of ads
Shoes	No. of ads	36	120	30%	$22,800	$6,840
Clothing	No. of ads	84	120	70%	$22,800	$15,960
Totals		120		100%		$22,800
Administrative	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Amount of sales
Shoes	Amount of sales	222000	370000	60%	$28,840	$17,304
Clothing	Amount of sales	148000	370000	40%	$28,840	$11,536
Totals		370000		100%		$28,840

[2]

	Expense Totals	Advertising	Administrative	Shoes	Clothing
Direct Expenses	$173,000	$19,000	$22,000	$118,000	$14,000
Indirect Utilities expense	$76,000	$3,800	$6,840	$26,600	$38,760
Total Dept Expense	$249,000	$22,800	$28,840	$144,600	$52,760
Service Depart Expenses:
Advertising Dept	$0	($22,800)		$6,840	$15,960
Administrative dept	$0		($28,840)	$17,304	$11,536
Total Expense allocated	$249,000	$0	$0	$168,744	$80,256