Question

Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). The table that follows shows the direct expenses incurred and square footage occupied by all four departments, as well as total sales for the two operating departments for the year 2017 Direct Expenses $ 20,000 30,000 128,000 19,000 Square Feet 1,680 1,260 10,290 7,770 Sales Department Advertising Administrative Shoes $179,800 130,200 Clothing The advertising department developed and distributed 130 advertisements during the year. Of these, 26 promoted shoes and 104 promoted clothing. Utilities expense of $75,000 is an indirect expense to all departments. Complete a departmental 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.

Answer 1

Answer

Utilities	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Square feet
Advertising	Square feet	1680	21000	8%	$75,000	$6,000
Administrative	Square feet	1260	21000	6%	$75,000	$4,500
Shoes	Square feet	10290	21000	49%	$75,000	$36,750
Clothing	Square feet	7770	21000	37%	$75,000	$27,750
Totals		21000		100%		$75,000
Advertising	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	No. of ads
Shoes	No. of ads	26	130	20%	$26,000	$5,200
Clothing	No. of ads	104	130	80%	$26,000	$20,800
Totals		130		100%		$26,000
Administrative	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Amount of sales
Shoes	Amount of sales	179800	310000	58%	$34,500	$20,010
Clothing	Amount of sales	130200	310000	42%	$34,500	$14,490
Totals		310000		100%		$34,500

	Expense Totals	Advertising	Administrative	Shoes	Clothing
Direct Expenses	$197,000	$20,000	$30,000	$128,000	$19,000
Indirect Utilities expense	$75,000	$6,000	$4,500	$36,750	$27,750
Total Dept Expense	$272,000	$26,000	$34,500	$164,750	$46,750
Service Depart Expenses:
Advertising Dept	$0	($26,000)		$5,200	$20,800
Administrative dept	$0		($34,500)	$20,010	$14,490
Total Expense allocated	$272,000	$0	$0	$189,960	$82,040