Question

The following cost data pertain to the operations of Montgomery Department Stores, Inc., for the month of July.

Corporate legal office salaries $ 84,300

Apparel Department cost of sales—Evendale Store $ 100,200

Corporate headquarters building lease $ 56,100

Store manager’s salary—Evendale Store $ 14,000

Apparel Department sales commission—Evendale Store $ 11,650

Store utilities—Evendale Store $ 16,300

Apparel Department manager’s salary—Evendale Store $ 8,350

Central warehouse lease cost $ 24,800

Janitorial costs—Evendale Store $ 12,300

The Evendale Store is just one of many stores owned and operated by the company. The Apparel Department is one of many departments at the Evendale Store. The central warehouse serves all of the company’s stores.

1. What is the total amount of the costs listed above that are direct costs of the Apparel Department? 2. What is the total amount of the costs listed above that are direct costs of the Evendale Store? 3. What is the total amount of the Apparel Department’s direct costs that are also variable costs with respect to total departmental sales?

Answer 1

1. Total direct costs for the Apparel Department = Apparel Department cost of sales—Evendale Store + Apparel Department sales commission—Evendale Store + Apparel Department manager’s salary—Evendale Store

Total direct costs for the Apparel Department = $100,200 + $11,650 + $8,350

Total direct costs for the Apparel Department = $120,200

2. Total direct costs for the Evendale Store = Apparel Department cost of sales—Evendale Store + Store manager’s salary—Evendale Store + Apparel Department sales commission—Evendale Store + Store utilities—Evendale Store + Apparel Department manager’s salary—Evendale Store + Janitorial costs—Evendale Store

Total direct costs for the Evendale Store = $100,200 + $14,000 + $11,650 + $16,300 + $8,350 + $12,300

Total direct costs for the Evendale Store = $162,800

3. Total direct costs for the Apparel Department that are also variable costs = Apparel Department cost of sales—Evendale Store + Apparel Department sales commission—Evendale Store

Total direct costs for the Apparel Department that are also variable costs = $100,200 + $11,650

Total direct costs for the Apparel Department that are also variable costs = $111,850