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 2019 Department Direct Expenses Square feet Advertising $ 18,000 Asinistrative 30,000 400 Shoes 102,000 1.ee $150,000 Clothing 14,000 2,600 100,000 The advertising department developed and distributed 120 advertisements during the year. Of these 36 promoted shoes and 84 promoted clothing. Utilities expense of $66,000 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 $66.000 of utilities expense to the four departments on the basis of floor space occupled. (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 Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Advertising Department Shoes Clothing Numerator Denominator % of Total Administrative Allocation Base Cost to be Allocated cost Percent of Allian Bus Numerator Denominator Allocated Dedament of Tora

Answer 1

UTILITIES	Allocation base	Percentage of allocation	Cost to be allocated	Allocated cost
Department	Floor space	Numerator	Denominator	% of total
Advertising	400	400	5,000	8%	66,000	5,280 (66,000*8%)
Administrative	400	400	5,000	8%	66,000	5,280 (66,000*8%)
Shoes	1,600	1,600	5,000	32%	66,000	21,120 (66,000*32%)
Clothing	2,600	2,600	5,000	52%	66,000	34,320 (66,000*52%)
Totals	5,000			100%		66,000

Utility expense have been allocated on the basis of square feet.

Advertising	Allocation base	Percentage of allocation	Cost to be allocated	Allocated cost
Department	Number of Ads	Numerator	Denominator	% of total
Shoes	36	36	120	30%	23,280	6,984 (23,280*30%)
Clothing	84	84	120	70%	23,280	16,296 (23,280*70%)
Totals	120			100%		23,280

Advertising expense to be allocated = direct expense+ utility expense allocated to advertising

=18,000 + 5,280

=23,280

Administration	Allocation base	Percentage of allocation	Cost to be allocated	Allocated cost
Department	sales	Numerator	Denominator	% of total
Shoes	150,000	150,000	250,000	60%	35,280	21,168 (35,280*60%)
Clothing	100,000	100,000	250,000	40%	35,280	14,112 (35,280*40%)
Totals	250,000			100%		35,280

Administrative cost to be allocated = 30,000 + 5,280

= 35,280

MARATHON RUNNING SHOP
Departmental Expense Allocation Spreadsheet
For The Year Ended December 31, 2019
	Expense Total	Advertising	Administrative	Shoes	Clothing
Direct expenses	164,000	18,000	30,000	102,000	14,000
Utilities expenses	66,000	5,280	5,280	21,120	34,320
Total department expenses		23,280	35,280	123,120	48,320
Service department expenses
Advertising		(23,280)		6,984	16,296
Administrative			(35,280)	21,168	14,112
Total expense allocated	230,000	0	0	151,272	78,728