Question

With Department A. sales of $550,000, Department B. sales of $380,000, and overhead expense to be allocated of $40,000, the distribution of overhead to Department A. based on sales is:

Answer 1

To distribute overhead expenses based on sales, you can use the proportion of each department's sales to the total sales to allocate the overhead expense.

The total sales are $550,000 (Department A) + $380,000 (Department B) = $930,000.

Now, allocate the overhead expense to each department based on their proportion of the total sales:

For Department A:
Overhead allocation for Department A = (Department A sales / Total sales) * Total overhead expense
Overhead allocation for Department A = ($550,000 / $930,000) * $40,000

Calculating this:
Overhead allocation for Department A = (0.5914) * $40,000 ≈ $23,656

Therefore, the allocation of overhead to Department A based on sales would be approximately $23,656.