Question

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

Corporate legal office salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,000 Apparel Department cost of sales—Evendale Store. . . . . . . . . . . . $90,000 Corporate headquarters building lease . . . . . . . . . . . . . . . . . . . . . . $48,000 Store manager’s salary—Evendale Store . . . . . . . . . . . . . . . . . . . . . $12,000 Apparel Department sales commission—Evendale Store . . . . . . . $7,000 Store utilities—Evendale Store. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,000 Apparel Department manager’s salary—Evendale Store. . . . . . . . $8,000 Central warehouse lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000 Janitorial costs—Evendale Store . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,000

The Evendale Store is 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.

Required:

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. The direct costs of the Apparel Department are as follows:

Apparel Department cost of sales—Evendale Store $ 90,000

Apparel Department sales commission—Evendale Store................................................................ 7,000

Apparel Department manager’s salary—Evendale Store................................................................ 8,000

Total direct costs for the Apparel Department........ $105,000 

2. The direct costs of the Evendale Store are as follows:

Apparel Department cost of sales—Evendale Store $ 90,000

Store manager’s salary—Evendale Store ............... 12,000

Apparel Department sales commission—Evendale Store................................................................ 7,000

Store utilities—Evendale Store.............................. 11,000

Apparel Department manager’s salary—Evendale Store................................................................ 8,000

Janitorial costs—Evendale Store ........................... 9,000

Total direct costs for the Evendale Store ............... $137,000

3. The direct costs in the Apparel Department that are also variable with respect to departmental sales is computed as follows:

Apparel Department cost of sales—Evendale Store $90,000

Apparel Department sales commission—Evendale Store................................................................ 7,000

Total direct costs for the Apparel Department that are also variable costs ....................................... $97,000 

1. The direct costs of the Apparel Department are as follows:

Apparel Department cost of sales—Evendale Store $ 90,000

Apparel Department sales commission—Evendale Store................................................................ 7,000

Apparel Department manager’s salary—Evendale Store................................................................ 8,000

Total direct costs for the Apparel Department........ $105,000 

2. The direct costs of the Evendale Store are as follows:

Apparel Department cost of sales—Evendale Store $ 90,000

Store manager’s salary—Evendale Store ............... 12,000

Apparel Department sales commission—Evendale Store................................................................ 7,000

Store utilities—Evendale Store.............................. 11,000

Apparel Department manager’s salary—Evendale Store................................................................ 8,000

Janitorial costs—Evendale Store ........................... 9,000

Total direct costs for the Evendale Store ............... $137,000

3. The direct costs in the Apparel Department that are also variable with respect to departmental sales is computed as follows:

Apparel Department cost of sales—Evendale Store $90,000

Apparel Department sales commission—Evendale Store................................................................ 7,000

Total direct costs for the Apparel Department that are also variable costs ....................................... $97,000