Question

Dunnes Stores has two service department, Advertising and Administration, and two operating departments, Hardware and Automotive. Sales, COGS, and direct expenses are given below. Complete the following table, including allocation of $220,000 of indirect costs. Indirect costs are allocated on the basis of square footage:Advertising Department:750 square feet, Administration Department:1,500 square feet, Hardware Department:3,000 square feet, Automotive Department:9,750 square feet

Dunnes Stores
Revenues and Expenses
Y/E December 31, 2018
		Service Departments		Operating Departments
	Totals	Advertising	Admin	Hardware	Automotive
Sales	1,500,000			$675,000	$825,000
COGS	375,000			100,000	275,000
Direct Expenses	275,000	50,000	100,000	50,000	75,000
Indirect Expenses	220,000
Totals
Allocated Service Dept. Expenses
Dept. Name
Dept. Name
Total Expenses Allocated to Operating Depts.

Use the table above to allocate the service department expenses to the operating departments. Advertising Costs are allocated on the basis of number of advertisements in each department. Hardware had 60 ads and Automotive had 90. Administrative costs are allocated on the basis of sales. Complete the following Departmental Income Statement

Dunnes Stores
Departmental Income Statement
Y/E December 31, 2018
	Hardware	Automotive	Combined
Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Direct Expenses
Indirect Expenses
Share of Advertising Expenses
Share of Admin Expenses
Total Operating Expenses
Operating Income (Loss)

Complete the following Income Statement showing Departmental Contribution to Overhead

Dunnes Stores
Income Statement Showing Departmental Contribution to Overhead
Y/E December 31, 2018
	Hardware	Housewares	Combined
Sales
Cost of Goods Sold
Gross Profit
Direct Expenses
Departmental Contribution to Overhead
Indirect Expenses
Share of Advertising Expenses
Share of Administrative Expenses
Total Operating Expenses
Operating Income (Loss)

Answer 1

Dunnes Stores
Revenues and Expenses
Y/E December 31, 2018
		Service Departments		Operating Departments
	Totals	Advertising	Admin.	Hardware	Automotive
Sales	1500000			675000	825000
COGS	375000			100000	275000
Direct expenses	275000	50000	100000	50000	75000
Indirect expenses	220000	11000	22000	44000	143000
Totals	495000	61000	122000	94000	218000
Allocated service dept. expenses
Dept. Name: Advertising		-61000		24400	36600
Dept. Name: Admin			-122000	54900	67100
Total expenses allocated to operating depts.	183000			79300	103700

Dunnes Stores
Departmental Income Statement
Y/E December 31, 2018
	Hardware	Automotive	Combined
Sales	675000	825000	1500000
Cost of goods sold	100000	275000	375000
Gross profit	575000	550000	1125000
Operating expenses:
Direct expenses	50000	75000	125000
Indirect expenses	44000	143000	187000
Share of Advertising expenses	24400	36600	61000
Share of Admin expenses	54900	67100	122000
Total operating expenses	173300	321700	495000
Operating income (loss)	401700	228300	630000

Dunnes Stores
Income Statement Showing Departmental Contribution to Overhead
Y/E December 31, 2018
	Hardware	Automotive	Combined
Sales	675000	825000	1500000
Cost of goods sold	100000	275000	375000
Gross profit	575000	550000	1125000
Direct expenses	50000	75000	125000
Departmental Contribution to Overhead	525000	475000	1000000
Indirect expenses	44000	143000	187000
Share of Advertising expenses	24400	36600	61000
Share of Admin expenses	54900	67100	122000
Total operating expenses	123300	246700	370000
Operating income (loss)	401700	228300	630000