Question

Macee Department Store has three departments, and it conducts advertising campaigns that benefit all departments. Advertising costs are $130,000 this year, and departmental sales for this year follow. Department Sales 1 $ 201,000 2 314,900 3 154,100 How much advertising cost is allocated to each department if the allocation is based on departmental sales

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Estimated overhead costs= $130,000

Total sales= 201,000 + 314,900 + 154,100= $670,000

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 130,000 / 670,000

Predetermined manufacturing overhead rate= $0.194 per sales dollar

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

1= 201,000*0.194= 38,994

2= 314,900*0.194= 61,090.6

3= 154,100*0.194= 29,895.4