Advertising department
expenses of $31,600 and purchasing department expenses of $63,300
of Cozy Bookstore are allocated to operating departments on the
basis of dollar sales and purchase orders, respectively.
Information about the allocation bases for the three operating
departments follows.
| Department | Sales | Purchase Orders | ||||
| Books | $ | 200,000 | 552 | |||
| Magazines | 84,000 | 348 | ||||
| Newspapers | 116,000 | 300 | ||||
| Total | $ | 400,000 | 1,200 | |||
Complete the following table by allocating the expenses of the two
service departments (advertising and purchasing) to the three
operating departments.
Homework Answers
| Ans. | Advertising | Allocation Base | Percent of Allocation Base | Cost to be allocated | Allocated cost | |||
| Department | Sales | Numerator | Denominator | % of Total | ||||
| Books Dept. | 200000 | 200000 | 400000 | 50% | 31600 | 15800 | ||
| Magazine Dept. | 84000 | 84000 | 400000 | 21% | 31600 | 6636 | ||
| Newspapers Dept. | 116000 | 116000 | 400000 | 29% | 31600 | 9164 | ||
| Totals | 400000 | 100% | 31600 | |||||
| Purchasing | Allocation Base | Percent of Allocation Base | Cost to be allocated | Allocated cost | ||||
| Department | Number of orders | Numerator | Denominator | % of Total | ||||
| Books Dept. | 552 | 552 | 1200 | 46% | 63300 | 29118 | ||
| Magazine Dept. | 348 | 348 | 1200 | 29% | 63300 | 18357 | ||
| Newspapers Dept. | 300 | 300 | 1200 | 25% | 63300 | 15825 | ||
| Totals | 1200 | 100% | 63300 | |||||
| % of Total = Numerator / Denominator * 100 | ||||||||
| Allocated cost = Cost to be allocated * Percentage (%) of total | ||||||||
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