Question

epper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments: Expense Basis for allocation Amount Rent Square feet of floor space $ 49,000 Advertising Amount of dollar sales $ 80,000 Administrative Number of employees $ 120,000 The following information is available for its three operating (sales) departments: Department Square Feet Dollar Sales Number of employees A 5,500 $ 355,000 31 B 5,900 $ 375,000 33 C 6,100 $ 520,000 35 Totals 17,500 $ 1,250,000 99 What is the total advertising expense allocated to Department B

Answer 1

Pepper Department Store

The total advertising expense allocated to Department B is:

= $24,000.

Step-by-step explanation:

a) Data and Calculations:

Expense Basis for allocation Amount

Rent Square feet of floor space $ 49,000

Advertising Amount of dollar sales $ 80,000

Administrative Number of employees $ 120,000

Department Square Feet Dollar Sales Number of employees

A 5,500 $ 355,000 31

B 5,900 $ 375,000 33

C 6,100 $ 520,000 35

Totals 17,500 $ 1,250,000 99

Advertising Expense Allocation:

Department A = $22,720 (355,000/$1,250,000 * $80,000)

Department B = $24,000 ($375,000/$1,250,000 * $80,000)

Department C = $33,280 ($520,000/$1,250,000 * $80,000)