Question

A retail store has three departments, S, T, and U, and does general advertising that benefits all departments. Advertising expense totaled $47,000 for the year, and departmental sales were as follows. Allocate advertising expense to Department T based on departmental sales.

Department S $109,000
Department T 218,850
Department U 142,150
Total 470,000
a) $47,000.
b) $21,885.
c) $10,900.
d) $16,567.
e) $13,900.

Answer 1

Allocated advertising = $21,885

Step-by-step explanation:

Giving the following information:

Advertising expense= $47,000

Sales:

Department S $109,000

Department T 218,850

Department U 142,150

Total 470,000

First, we need to calculate the proportion of sales of Department T:

Sales proportion Department T= 218,850 / 470,000= 0.4656

Now, we can allocate advertising costs:

Allocated advertising = 47,000*0.4656

Allocated advertising = $21,884