Advertising department expenses of $54,100 and purchasing department expenses of $33,800 of Cozy Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.
Department Sales Purchase Orders
Books $143,500 1,440
Magazines 70,000 756
Newspapers 136,500 1,404
Total $350,000 3,600
1. Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments.
Advertising Allocation Base Percent of Cost to be Allocated Cost
Allocation Base Allocated
Department Sales Numerator Denominator %of Total
Books $143,500 $350,000
Magazines 70,000 0
Newspapers 136,500 0
Totals 350,000 0
Purchasing Allocation Base Percent of Cost to be Allocated Cost
Allocation Base Allocated
Department Numerator Denominator %of Total
Books 0
Magazines 0
Newspapers 0
Totals 0
2. Complete the spreadsheet by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments. (Amounts to be deducted should be indicated with minus sign.)
COZY BOOKSTORE
Departmental Expense Allocation Spreadsheet
Expense Advertising Purchasing Books Magazines Newspapers
Totals
Total department
expenses $676,000 $54,100 $33,800 $175,800 $135,200 $277,100
Service Dept. Expenses
Advertising Dept.
Purchasing Dept.
Total expenses
allocated $676,000 $54,100 $33,800 $175,800 $135,200 $277,100
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