Question

Advertising department expenses of $85,600 and purchasing department expenses of $51,400 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	$	193,200			1,551
Magazines		109,200			693
Newspapers		117,600			1,056
Total	$	420,000			3,300

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

Answer 1

• All working forms part of the answer
• Allocation of Advertising & Purchasing Department

Advertising	Allocation base	% of allocation base			Cost to be allocated	Allocated cost
Department:	Sales	Numerator	Denominator	% of total
Books	Sales	193,200	420,000	46%	$     85,600.00	$    39,376.00
Magzines	Sales	109,200	420,000	26%	$     85,600.00	$    22,256.00
Newspaper	Sales	117,600	420,000	28%	$    85,600.00	$    23,968.00
Totals		420,000				$    85,600.00

Purchasing	Allocation base	% of allocation base			Cost to be allocated	Allocated cost
Department:	Purchase orders	Numerator	Denominator	% of total
Books	Purchase orders	1,551	3,300	47%	$     51,400.00	$   24,158.00
Magzines	Purchase orders	693	3,300	21%	$     51,400.00	$    10,794.00
Newspaper	Purchase orders	1,056	3,300	32%	$     51,400.00	$    16,448.00
Totals		3,300				$    51,400.00

• Partial Allocated table [NOT ASKED by you, just for information]

	Advertising	Purchasing	Books	Magzines	Newspaper
Total department expenses	$    85,600.00	$    51,400.00	NO DATA PROVIDED
Total Departmental Expenses	$    85,600.00	$    51,400.00	$                          -	$                    -	$                   -
Service Department expenses:
Advertising	$ (85,600.00)		$           39,376.00	$     22,256.00	$    23,968.00
Purchasing		$ (51,400.00)	$           24,158.00	$     10,794.00	$    16,448.00