1.

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	$	46,000			Number of employees
Depreciation		27,000			Cost of goods sold
Advertising		61,000			Net sales

Item	Drilling			Grinding			Total
Number of employees		1,200			1,800			3,000
Net sales	$	360,000		$	540,000		$	900,000
Cost of goods sold	$	114,000		$	186,000		$	300,000

The amount of the advertising cost that should be allocated to Grinding for the current period is:

2.

Butler Corporation is considering the purchase of new equipment costing $66,000. The projected annual after-tax net income from the equipment is $2,400, after deducting $22,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Butler requires a 10% return on its investments. The present value of an annuity of $1 for different periods follows:

Periods	10%
1	0.9091
2	1.7355
3	2.4869
4	3.1699

What is the net present value of the machine?

3.

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	$	44,000			Number of employees
Depreciation		25,000			Cost of goods sold
Advertising		48,000			Net sales

Item	Drilling			Grinding			Total
Number of employees		1,600			2,400			4,000
Net sales	$	348,000		$	522,000		$	870,000
Cost of goods sold	$	106,400		$	173,600		$	280,000

The amount of the advertising cost that should be allocated to Drilling for the current period is:

4. Based on a predicted level of production and sales of 29,000 units, a company anticipates total variable costs of $142,100, fixed costs of $58,000, and operating income of $284,200. Based on this information, the budgeted amount of operating income for 26,000 units would be:

5. A company rents a building with a total of 160,000 square feet, which are evenly divided between two floors. The company allocates the rent for space on the first floor at twice the rate of space on the second floor. The total monthly rent for the building is $36,000. How much of the monthly rental expense should be allocated to a department that occupies 11,000 square feet on the first floor?

6. A company's flexible budget for 12,000 units of production reflects sales of $300,000; variable costs of $96,000; and fixed costs of $90,000. Calculate the expected level of operating income if the company produces and sells 15,000 units.