Question

Super Grocery 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 Administrative Square feet of floor space $ 34,000 Advertising Amount of dollar sales $ 27,000 The following information is available for its three operating (sales) departments: Department Square Feet Dollar Sales Produce 1,470 $ 99,000 Bakery 980 $ 49,000 Meats 2,450 $ 61,000 Totals 4,900 $ 209,000 What is the total administrative expense allocated to the Meats department?

Answer 1

$17,000

Step-by-step explanation:

Using the floor spacing occupied by each department as the basis for the allocation of the administrative expense. In other words, the bigger the square feet occupied, the bigger the total administrative expense to be allocated.

Given

Department Square Feet Dollar Sales

Produce 1,470 $ 99,000

Bakery 980 $ 49,000

Meats 2,450 $ 61,000

Totals 4,900 $ 209,000

And the Amount Administrative Square feet of floor space $ 34,000

Then the administrative cost allocated to the meat department

= (2450/4900) * $ 34,000

= $17,000

Answer 2

Allocated administrative expense to Meat department = $17,000

Step-by-step explanation:

The basis of allocating the administrative expense is the floor space occupied by the the department.

Administrative expense

= Floor space occupied/Total floor area × Administrative expense

Total floor area= (1,470+980+2,450)= 4,900 square feet

Floor area occupied by meat department = 2,450

Administrative expense = $34,000

Allocated administrative expense to Meat department:

= (2,450/4,900) × $34,000 = $17,000

= $17,000