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 Expenses Total Allocation Basis
Salaries $31,000​ Number of employees
Depreciation 20,500​ Cost of goods sold
Advertising 41,500​ Net sales
Item Drilling Grinding Total
Number of employees 1080​ 1620​ 2700​
Net sales $326,625​ 477,375​ $804,000​
Cost of goods sold $76,500​ 127,500​ $204,000​
The amount of the total office expenses that should be allocated to Grinding for the current period is:________.
a. $71,600.
b. $43,160.
c. $109,000.
d. $600,000.
e. $53,000.

Answer 1

To allocate the total office expenses to Grinding, calculate the allocation for each expense category using the respective allocation bases and sum up the results. The correct answer is close to option e) $53,000.

Step-by-step explanation:

To determine the amount of total office expenses that should be allocated to Grinding, we need to calculate the allocation for each expense category using their respective allocation bases:

- Salaries: $31,000 * (1620/2700) = $18,600

- Depreciation: $20,500 * (127,500/204,000) = $12,784

- Advertising: $41,500 * (477,375/804,000) = $24,816

Summing up these amounts gives us: $18,600 + $12,784 + $24,816 = $56,200. Therefore, the amount of total office expenses that should be allocated to Grinding for the current period is $56,200.

Answer 2

Total Expenses $ 56,053.13

Step-by-step explanation:

Marks Corporation

Office Expenses Total Allocation Basis

Salaries $31,000​ Number of employees

Depreciation 20,500​ Cost of goods sold

Advertising 41,500​ Net sales

Item Drilling Grinding Total

Number of employees 1080​ 1620​ 2700​

Cost of goods sold $76,500​ 127,500​ $204,000​

Net sales $326,625​ 477,375​ $804,000​

We calculate the expenses for the Grinding using ABC. This is done by taking the ratio of the allocation basis of the grinding with the total and multiplying it with the corresponding expense.

Office Expenses Total Grinding

Salaries $31,000​ (1620/2700)* $31,000​

= $ 18600

Depreciation 20,500​ (​127,500​ /$204,000 )20,500

=12812.5

Advertising 41,500​ (477,375/ $804,000) 41,500

​= 24640.63

Total Expenses $ 56,053.13