Question

Assigning Traceable Fixed Expenses
Selected data for Miller Company, which operates three departments, follow:

		Department A	Department B	Department C
Inventory		$60,000	$216,000	$84,000
Equipment (average cost)		$540,000	$324,000	$216,000
Payroll		$810,000	$720,000	$270,000
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				$60,000
Real estate taxes				18,000
Personal property taxes (on inventory and equipment)				28,800
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.

		Department A	Department B	Department C
Depreciation		Answer	Answer	Answer
Real estate taxes		Answer	Answer	Answer
Personal property taxes		Answer	Answer	Answer
Personnel dept. expenses		Answer	Answer	Answer

Answer 1

Here you go with the solution:

	Department A	Department B	Department C	Total
Inventory	$60,000	$2,16,000	$84,000	$3,60,000
Equipment (average cost)	$5,40,000	$3,24,000	$2,16,000	$10,80,000
Payroll	$8,10,000	$7,20,000	$2,70,000	$18,00,000
Square Feet of Floor Space	18,000	9,000	3,000	30,000

Type of Fixed Expense	Amount	Basis (Apportioned on the basis of)	Department A ($)	Department B ($)	Department C ($)
Depreciation on Equipment	$60,000	Equipment	30,000	18,000	12,000
Real Estate Taxes	$18,000	Sq Feet of Floor Space	10,800	5,400	1,800
Personal Property taxes	$28,800	Inventory & Equipment	12,000	10,800	6,000
Personnal Dept. expenses	$40,000	Payroll	18,000	16,000	6,000
Total	70,800	50,200	25,800
Apportionment calculation:
Depreciation on Equipment
Dept A - $ 60,000*5,40,000/$ 10,80,000
Dept B - $ 60,000*3,24,000/$ 10,80,000
Dept C - $ 60,000*2,16,000/$ 10,80,000
and so on….