Question

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Office ExpensesTotal Allocation BasisSalaries$30,000 Number of employeesDepreciation 20,000 Cost of goods soldAdvertising 40,000 Net sales ItemDrilling Grinding TotalNumber of employees 1,000 1,500 2,500 Net sales$325,000 $475,000 $800,000 Cost of goods sold$75,000 $125,000 $200,000 The amount of the total office expenses that should be allocated to Drilling for the current period is:

Answer 1

Marks Corporation

The amount of the total office expenses that should be allocated to Drilling for the current period is:

= $51,368

Step-by-step explanation:

a) Data and Calculations:

Office Expenses Total Allocation Basis

Salaries $30,000 Number of employees

Depreciation 20,000 Cost of goods sold

Advertising 40,000 Net sales

Item Drilling Grinding Total

Number of employees 1,000 1,500 2,500

Net sales $325,000 $475,000 $800,000

Cost of goods sold $75,000 $125,000 $200,000

Total Expenses assigned to Drilling:

Salaries = $12,000 ($30,000 * 1,000/2,500)

Depreciation = 12,000 ($20,000 * 75,000/125,000)

Advertising = 27,368 ($40,000 * 325,000/475,000)

Total expense $51,368