Question

Ashby clothing is a female clothing line selling high end winter apparel. The company has four brick and mortar locations in central Pa. All locations share the use of the professional back office staff personnel at the company's headquarters. In 2018 the cost of the marketing department was $133,500. The cost of the accounting department was $184,850. The cost of the information technology department was $61,155. Lastly, the customer service call center had a cost of $77,020. Below you will find information was provided about the operations about each store location. Question: Allocate the cost of the back office departments to each of the stores based on, (A) Total Revenue, (B) Gross Margin, and (C) Quantity of winter coats sold.

			East Mall	West Mall	South Mall	North Mall
Sales Revenue			$ 505,000	$ 720,000	$   225,000	$    630,000
Cost of Goods Sold			$ 115,000	$ 470,000	$   100,000	$    400,000
Quantity of Coats Sold			1825	3000	800	2500

Answer 1

Part-1 Allocation of Backoffice cost Cost using Sales revenue
Mall	Sales Revenue	Proportion	Total Cost	Allocation
East Mall	505000	24%	$456,525.00	$110,839.00
West Mall	720000	35%	$456,525.00	$158,027.88
South Mall	225000	11%	$456,525.00	$49,383.71
North Mall	630000	30%	$456,525.00	$138,274.40
Total	2080000			$456,525.00
Part-2 Allocation of Backoffice cost Cost using Gross Margin - Ashby CLothing
Mall	Gross Margin (Sales-COGS)	Proportion	Total Cost	Allocation
East Mall	390000	39%	$456,525.00	$178,939.45
West Mall	250000	25%	$456,525.00	$114,704.77
South Mall	125000	13%	$456,525.00	$57,352.39
North Mall	230000	23%	$456,525.00	$105,528.39
Total	995000			$456,525.00
Part-3 Allocation of Backoffice cost Cost using Qty of Coats Sold- Ashby CLothing
Mall	Qty of Coats Sold	Proportion	Total Cost	Allocation
East Mall	1825	22%	$456,525.00	$102,542.54
West Mall	3000	37%	$456,525.00	$168,563.08
South Mall	800	10%	$456,525.00	$44,950.15
North Mall	2500	31%	$456,525.00	$140,469.23
Total	8125			$456,525.00

Comptuation of Backoffice Cost
Marketing Department	$133,500.00
Accounting Department	$184,850.00
IT Department	$61,155.00
Customer Servcie	$77,020.00
Total Cost	$456,525.00