Question

Assigning Traceable Fixed Expenses Selected data for Miller Company, which operates three departments, follow: Department A Department B Department C Inventory $80,000 $288,000 $112,000 Equipment (average cost) $720,000 $432,000 $288,000 Payroll $405,000 $360,000 $135,000 Square feet of floor space 18,000 9,000 3,000 During the year, the company’s fixed expenses included the following: Depreciation on equipment $80,000 Real estate taxes 24,000 Personal property taxes (on inventory and equipment) 38,400 Personnel department expenses 40,000 Assume that the property tax rate is the same for both inventory and equipment. Using the most causally related bases, prepare a schedule assigning the fixed expenses to the three departments. Hint: Not all fixed expenses are traceable to the three departments. One of these fixed costs should be considered a common cost and not traceable to the departments. Do not round until your final answer. Round final answer to the nearest whole number.

Answer 1

Schedule assigning the fixed expenses to the three departments
	Department A	Department B	Department C	Total
Depreciation on Equipment	40000	24000	16000	80000
Real Estate Taxes	14400	7200	2400	24000
Personal Property taxes	16000	14400	8000	38400
Personnel Department expenses				40000
Depreciation is assigned using cost of equipment for each department
= Total depreciation/Total cost of equipment x equipment cost for department = Depreciation for Department
Real estate taxes are assigned using the floor area space for each department
Personal Property taxes are assigned using the cost of inventory and equipment as the rate of property tax is same for inventory and equipment
Inventory	$80,000	$288,000	$112,000
Equipment	$720,000	$432,000	$288,000
Total	$800,000	$720,000	$400,000
Personal property taxes	$16,000	$14,400	$8,000
Personnel Department expenses are common cost and are not traceable to departments