Question

Chilton Day School allocates marketing and administrative costs to its three schools based on total annual tuition revenue for the schools. Last year the allocations (000s omitted) were as follows:

	Preschool			Middle School			High School			Total
Tuition revenue	$	1,550		$	1,850		$	2,250		$	5,650
Marketing and administration		300			350			425			1,075

In the current year, the middle and high schools experienced no change in revenues, but the preschool’s tuition revenue increased to $1.95 million. Marketing and administrative costs rose to $1,300,000.

Required:

1. Using revenue as an allocation base, how should the costs be allocated for the current year? (Do not round intermediate calculations. Enter your dollar answers in thousands rounded to 2 decimal places.)

Answer 1

ANSWER:

	Pre school	middle school	high school	total
Tuition revenue	$1,950,000	$1,850,000	$2,250,000	$6,050,000
Marketing and administration	$419,008.26	$397,520.66	$483,471.07	$1,300,000

marketing & administrative costs

allocated to pre school = $1300000 x ($1950000/$6050000) = $419,008.26

allocated to middle school = $1300000 x ($1850000/$6050000) = $397,520.66

allocated to high school = $1300000 x ($2250000/$6050000) = $483,471.07