Exercise 9-6 (Algo) Departmental expense allocations LO P2 Gomez Company has two service departments (Personnel and Office) and two operating departments (Shoes and Clothing). Following are the direct expenses and square feet occupied by the four departments, and the total sales for the two operating departments. Department Direct Expenses Square Feet Sales Personnel $ 14,000 1,200 Office 22,000 840 Shoes 99,000 3,960 $ 214,600 Clothing 13,000 6,000 155,400 The company also has $70,000 of utilities expense, which is an indirect expense to all departments and is allocated to the four departments based on square feet occupied. The Shoes department has 36 employees and the Clothing department has 144 employees. Personnel expense is allocated to operating departments based on the number of employees. Office expense is allocated to operating departments based on sales. 1. Allocate utilities expense to the four departments. 2. Allocate personnel expense to the Shoes and Clothing departments. 3. Allocate office expense to the Shoes and Clothing departments.

Exercise 9-6 (Algo) Departmental expense allocations LO P2 Gomez Company has two service departments (Personnel and Office) and two operating departments (Shoes and Clothing). Following are the direct expenses and square feet occupied by the four departments, and the total sales for the two operating departments. Sales Department Personnel Direct Expenses Square Feet $ 14,000 22,000 99,000 13,000 1,200 840 Office Shoes 3,960 $ 214,600 155,400 Clothing 6,000 The company also has $70,000 of utilities expense, which is an indirect expense to all departments and is allocated to the four departments based on square feet occupied. The Shoes department has 36 employees and the Clothing department has 144 employees. Personnel expense is allocated to operating departments based on the number of employees. Office expense is allocated to operating departments based on sales. 1. Allocate utilities expense to the four departments. 2. Allocate personnel expense to the Shoes and Clothing departments. 3. Allocate office expense to the Shoes and Clothing departments. Utilities Department Allocation Base Square feet occupied Numerator Denominator % of Total Personnel 1,200 1,200 12,000 10.00% Office 840 840 12,000 Shoes 3,960 3,960 12,000 7.00% 33.00% 50.00% 6,000 6,000 12,000 Clothing Totals 30 12,000 100.00% Personnel expense Allocation Base Percent of Allocation Base Department Number of employees Numerator Denominator % of Total 36 36 180 Shoes Clothing Totals 20.00% 80.00% 144 144 180 180 100.00% Allocation Base Percent of Allocation Base Office expense Department Sales Numerator Denominator % of Total Shoes $ 214,600 $ 370,000 58.00% Clothing 155,400 370,000 42.00% 100.00% Totals $ $ 214,600 155,400 370,000 Percent of Allocation Base Cost to be Allocated $ 70,000 70,000 70,000 70,000 Cost to be Allocated Cost to be Allocated Allocated Cost $ 70,000 Allocated Cost Allocated Cost