Question

Exercise 9-3 Service department expenses allocated to operating departments LO P2

Advertising department expenses of $57,800 and purchasing department expenses of $57,800 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	$	184,900			816
Magazines		107,500			476
Newspapers		137,600			408
Total	$	430,000			1,700

  
Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments.

Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments.

	Advertising Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Books Magazines Newspapers Totals Purchasing Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Numerator Denominator % of Total Books Magazines Newspapers Totals

	COZY BOOKSTORE Departmental Expense Allocation Spreadsheet Expense Totals Advertising Purchasing Books Magazines Newspapers Total department expenses $578,000 $57,800 $57,800 $138,700 $115,600 $208,100 Service Dept. Expenses Advertising Dept. Purchasing Dept. Total expenses allocated $578,000

Answer 1

Advertisement		Allocation	Percentage of allocation base			Cost to be	Allocated
		Base	Numerator	Denominator	% of total	Allocated	Cost
Department
Books		Sales	184900	430000	43.00%	57800	24854
magazines		Sales	107500	430000	25.00%	57800	14450
Newspaper		Sales	137600	430000	32.00%	57800	18496
Total			430000		100.00%		50000
							57800
Purchasing		Allocation	Percentage of allocation base			Cost to be	Allocated
		Base	Numerator	Denominator	% of total	Allocated	Cost
Department
Books		Orders	816	1700	48%	57800	27744
magazines		Orders	476	1700	28.00%	57800	16184
Newspaper		Orders	408	1700	24.00%	57800	13872
Total			1700		100.00%		57800
Departmental Expense Allocation Spreadsheet
		Expenses	Advertisemtn	Purchasing	Books	Magazines	Newspaper
		Total	Total	Deptt.	Deptt.	Deptt.	Deptt.
Total Deptt expense		578000	57800	57800	138700	115600	208100
Service deptt expense
Advertising			-57800		24854	14450	18496
Purchasing				-57800	27744	16184	13872
Total Expense allocated			0	0	191298	146234	240468