Question

Coconut Shop has an advertising and administrative departments (service departments) and shoes and clothing departments (two operating departments). The below table list the direct expenses incurred along with the square footage occupied by all the departments. The two operating departments' total sales for 2017 are included below. Sales Department Advertising Administrative Shoes Clothing Direct Expenses $ 18,000 30,000 102,000 14,000 Square Feet 400 400 1,600 2,600 $150,000 100,000 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 Coconut 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 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 P ercent of Allocation Base cond to be Allocated Cost Department Numerator Denom Administrative I shoes Clothing Totals Advertising Allocation Base Cost to be noted Cost P ercent of Allocation Allocated Allocated Cost Numerator Denominator of Total Department Clothing

Answer 1

Answer

Utilities	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Square feet
Advertising	Square feet	400	5000	8%	$66,000	$5,280
Administrative	Square feet	400	5000	8%	$66,000	$5,280
Shoes	Square feet	1600	5000	32%	$66,000	$21,120
Clothing	Square feet	2600	5000	52%	$66,000	$34,320
Totals		5000		100%		$66,000
Advertising	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	No. of ads
Shoes	No. of ads	36	120	30%	$23,280	$6,984
Clothing	No. of ads	84	120	70%	$23,280	$16,296
Totals		120		100%		$23,280
Administrative	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Amount of sales
Shoes	Amount of sales	150000	250000	60%	$35,280	$21,168
Clothing	Amount of sales	100000	250000	40%	$35,280	$14,112
Totals		250000		100%		$35,280

	Expense Totals	Advertising	Administrative	Shoes	Clothing
Direct Expenses	$164,000	$18,000	$30,000	$102,000	$14,000
Indirect Utilities expense	$66,000	$5,280	$5,280	$21,120	$34,320
Total Dept Expense	$230,000	$23,280	$35,280	$123,120	$48,320
Service Depart Expenses:
Advertising Dept	$0	($23,280)		$6,984	$16,296
Administrative dept	$0		($35,280)	$21,168	$14,112
Total Expense allocated	$230,000	$0	$0	$151,272	$78,728