2. Brenda Cycle Shop has two services departments (advertising and administration) and two operating departments (cycles and clothing). During 2015, The department has the following direct expenses and occupied the following amount of floor space: Department Direct expenses Square feet Advertising $32,000 1,088 Administrative $37,000 1,152 Cycles $203,200 6,336 Clothing $23,800 4,224 The advertising department developed and distributed 100 advertisements during the year. Of these, 76 promoted cycles and 24 promoted clothing. The store sold $600,000 of merchandise during the year. Of this amount, $450,000 is from cycle's department, and $150,000 is from clothing department. The utilities expense of $128,000 is from the clothing department. Required: Prepare departmental expense allocation spreadsheet that assign (1) direct expenses to each of the four departments (2) $128,000 of utilities expense to the four departments on the basis of the floor space occupied. (3) Advertising department's expense to the two operating departments on the basis of number ads placed that promoted a department's product. (4) Administrative department's expense to the two operating departments based on the amount of sales.3. Tea Corp. began operations in January 2016 with two operating (selling) departments and one service (office) department. Its departmental income statements follows: Tea Corporation Departmental Income Statements For Year Ended December 31. 2016 Clock Minor Combined Sales 122500 52500 175000 Cost of goods sold 60000 32000 92000 Gross Profit 62500 20500 83000 Direct expenses Sales salaries 20000 7000 27000 Advertising 1200 500 1700 Store supplies used 900 400 1300 Depreciation-equipment 1500 300 1800 Total direct expenses 23600 8200 31800 Allocated expenses Rent expense 7020 3780 10800 Utilities expense 2600 1400 4000 Store of office department expenses 10500 4500 15000 Total allocated expenses 20120 9680 29800 Total expenses 43720 17880 61600 Net income 18780 2620 21400 Tea Corp plans to open a third department in January 2017 that will sell paintings. Management predicts that new department will generate $35,000 in sales with a 55% gross profit margin and will require the following direct expenses: sale salaries $8,000; advertising $800; store supplies $500; and equipment depreciation $200. It will fit the new department into the current rented space by taking some square footage from the other two departments. When open the new painting department will fill one fifth of the spacer used by the clock department and one sixth used by minor department. Management does not predict any increase in utilities costs, which are allocated to the departments in proportion to occupied space (rent space). The company allocates office department's expenses to the operating department in proportion to their sales. It expects the painting department to increase total office department expense by $7,000. Since the painting department will bring new customers into the store, management expects sales in both the clock and minor departments to increase by 7%. No changes of those departments gross profit percentage or their direct expenses are expected except for store supplies used, which will increase in proportion to sales. Required: Prepare departmental income statements that show company's predicted results of operations for calendar year 2016 for three operating departments and combined totals