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Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). The table that follows shows the direct expenses
Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). The table that follows shows the direct expenses incurred and square footage occupied by all four departments, as well as total sales for the two operating departments for the year 2019. Sales Department Advertising Administrative Shoes Clothing Direct Expenses $ 15,000 24,000 102,000 10,000 Square Feet 770 1,320 4, 620 4, 290 $273, 800 96, 200 The advertising department developed and distributed 150 advertisements during the year. Of these, 15 promoted shoes and 135 promoted clothing. Utilities expense of $50,000 is an indirect expense to all departments. Complete a departmental expense allocation spreadsheet for Marathon Running Shop. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) the $50,000 of utilities expense to the four departments on the basis of floor space occupied, (3) the advertising department's expenses to the two operating departments on the basis of the number of ads placed that promoted a department's products, and (4) the administrative department's expenses to the two operating departments based on the amount of sales. Utilities Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Advertising Administrative Shoes Clothing Totals Floor space occupied 770 1,320 4,620 4,290 11,000 Numerator Denominator % of Total 770 11,000 7.00 $ 50,000 $ 3,500 1,320 11,000 12.00 50,000 6,000 4.620 11,000 42.00 50,000 21,000 4,290 11,000 39.00 50,000 19,500 100.00 $ 50,000 Cost to be Percent of Allocation Base Allocated Cost Allocated Numerator Denominator % of Total 15 150 10.00 135 150 90.00 100.00 Advertising Allocation Base 15 Department Shoes Clothing Totals 135 150 Administrative Allocation Base Percent of Allocation Base Cost to be Allocated Allocated Cost Department Shoes Numerator Denominator 273,800 $ 273,800 $ 370,000 % of Total 74.00 $ Clothing Totals 0 MARATHON RUNNING SHOP Departmental Expense Allocation Spreadsheet For Year Ended December 31, 2019 Expense Totals Advertising Administrative Shoes Clothing 0 0 0 0 0 0 Direct expense Indirect utilities expenses Total dept. exp. Service Dept. Expenses Advertising Dept. Administrative Dept. 0 0 Total expenses allocated $ 0 $ 0 $ 0 $ 0 $ 0
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