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[The following information applies to the questions displayed below.] National Retail has two departments, Housewares and Sporting. Indirect expenses for the period follow. Rent $

[The following information applies to the questions displayed below.]

National Retail has two departments, Housewares and Sporting.

Indirect expenses for the period follow.

Rent $ 45,000
Advertising 25,000
Insurance 10,000
Total $ 80,000

The company occupies 4,000 square feet of a rented building. In prior periods, the company divided the $80,000 of indirect expenses by 4,000 square feet to find an average cost of $20 per square foot, and then allocated indirect expenses to each department based on the square feet it occupied.

The company now wants to allocate indirect expenses using the allocation bases shown below.

Department Square Feet Sales Value of Insured Assets
Housewares 1,840 $ 270,000 $ 49,000
Sporting 2,160 230,000 51,000
Total 4,000 $ 500,000 $ 100,000

2. Allocate indirect expenses to the two departments. Rent expense is allocated based on square feet occupied. Advertising expense is allocated based on total sales. Insurance expense is allocated based on the value of insured assets.

Allocate $45,000 of rent using square feet occupied
Square Footage Percent of Total Cost Allocated
Housewares 1,840 $20,700
Sporting 2,160 24,300
Total 4,000 0% $45,000
Allocate $25,000 of advertising using percentage of sales
Sales Percent of Total Cost Allocated
Housewares $13,500
Sporting 11,500
Total $0 0% $25,000
Allocate $10,000 of insurance using value of insured assets
Assets Insured Percent of Total Cost Allocated
Housewares $4,900
Sporting 5,100
Total $0 0% $10,000

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