Exercise 9-3

Service department expenses allocated to operating departments

Lucia Company has two service departments: Office and Purchasing. Total expenses for the Office is $24,000 and for Purchasing is $34,000. Expenses for the Office are allocated to operating departments based on sales. Expenses for Purchasing are allocated to operating departments based on purchase orders. Allocate the expenses from (a) the Office and (b) Purchasing to each of the companys three operating departments using the following information.

Department Sales Purchase Orders \begin{tabular}{lrr} Books .......... & $495,000 & 516 \\ Magazines....... & 198,000 & 360 \\ Newspapers ..... & 207,000 \\ Totals.......... & $900,000 & 324 \\ \hline \end{tabular}