Question

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 folowing amount of floor space. Department Advertising Administrative Shoes Clothing Direct Expenses $ 19,000 34.000 112,000 17,000 Square Feet 850 1,530 5.780 8.840 The advertising department developed and distributed 200 avertisements during the year. Of these, 20 promoted shoes and 180 promoted clothing. The store sold $290,000 of merchandise during the year. Of this amount, $121,800 is from the shoes department, and $168,200 is from the clothing department. The utilities expense of $50,000 is an indirect expense to al 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 $50,000 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 Numerator Denominator % of Total Department Advertising Administrative Shoes Clothing Totals Advertising Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Numerator Department Shoes Denominator % of Total Clothing Totals

Answer 1

Utilities	Allocation Base	Percent of Allocation Base			Cost to be Allocated	Allocated Cost
Department	Floor Space	Numerator	Denominator	% of Total
Advertising	850	850	17000	5%	50000	2500
Administrative	1530	1530	17000	9%	50000	4500
Shoes	5780	5780	17000	34%	50000	17000
Clothing	8840	8840	17000	52%	50000	26000
Totals	17000			100%		50000
Advertising	Allocation Base	Percent of Allocation Base			Cost to be Allocated	Allocated Cost
Department	Number of Ads	Numerator	Denominator	% of Total
Shoes	20	20	200	10%	21500	2150
Clothing	180	180	200	90%	21500	19350
Totals	200			100%		21500
Administrative	Allocation Base	Percent of Allocation Base			Cost to be Allocated	Allocated Cost
Department	Amount of sales	Numerator	Denominator	% of Total
Shoes	121800	121800	290000	42%	38500	16170
Clothing	168200	168200	290000	58%	38500	22330
Totals	290000			100%		38500
MARATHON RUNNING SHOP
Departmental Expense Allocation Spreadsheet
For Year Ended December 31, 2015
	Expense Totals	Advertising	Administrative	Shoes	Clothing
Direct expense	182000	19000	34000	112000	17000
Indirect utilities expenses	50000	2500	4500	17000	26000
Total dept. exp.	232000	21500	38500	129000	43000
Service Dept. Expenses
Advertising Dept.		-21500	0	2150	19350
Administrative Dept.		0	-38500	16170	22330
Total expenses allocated	232000	0	0	147320	84680