Marathon Running Shop has two service departments advertisin

Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). During 2015, the departments had the following direct expenses and occupied the following am ount of floor s pace Direct Department Advertisin Administrative Shoes Clothing Expenses Square Feet 1,350 1,350 4,800 7,500 $19,000 22,000 93,000 12,000 The advertising department developed and distributed 230 advertisements during the year. Of these, 69 promoted shoes and 161 promoted clothing. The store sold $320,000 of merchandise during the year. Of this amount, $204,800 is from the shoes department, and $115,200 is from the clothing department. The utilities expense of $45,000 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 $45,000 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 Cost to be Allocated Utilities Allocation Base Percent of Allocation Ba Allocated Cost Department Denominator % of Total Advertising Administrative Shoes Clothing Totals Cost to be Allocated Allocation Base Allocated Cost Advertising Department Shoes Clothing Numerator Denominator % of Total Totals Cost to be Allocated Administrative Allocation Base Percent of Allocation Ba Allocated Cost Numerator Denominator % of Total Department Shoes Clothing Totals MARATHON RUNNING SHOP

Solution

Utilities Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Department Floor space occupied Numerator Denominator % of Total Advertising                              1,350              1,350              15,000                9.00 $                   45,000 $            4,050 Administrative                              1,350              1,350              15,000                9.00                       45,000                4,050 Shoes                              4,800              4,800              15,000              32.00                       45,000              14,400 Clothing                              7,500              7,500              15,000              50.00                       45,000              22,500 Totals                            15,000            100.00 $          45,000 Advertising Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Department Number of ads Numerator Denominator % of Total Shoes                                   69                   69                   230              30.00 $                   23,050 $            6,915 Clothing                                 161                 161                   230              70.00                       23,050              16,135 Totals                                 230            100.00 $          23,050 Administrative Allocation Base Percent of Allocation Base Cost to be allocated Allocated Cost Department Sales Numerator Denominator % of Total Shoes $                      204,800 $      204,800 $        320,000              64.00 $                   26,050 $          16,672 Clothing                          115,200          115,200            320,000              36.00                       26,050                9,378 Totals $                      320,000            100.00 $          26,050 MARATHON RUNNING SHOP Departmental Expense Allocation Spreadsheet For Year Ended December 31,2015 Expense Totals Advertising Administrative Shoes Clothing Direct expense $                      146,000 $        19,000 $          22,000 $        93,000 $                   12,000 Indirect utilities expenses                            45,000              4,050                4,050            14,400                       22,500 Total dept. exp.                          191,000            23,050              26,050          107,400                       34,500 Service Dept. Expenses Advertising Dept.          (23,050)              6,915                       16,135 Administrative Dept.            (26,050)            16,672                         9,378 Total expenses allocated $                      191,000 $                -   $                  -   $      130,987 $                   60,013 Note: advertising and administrative cost is taken from dept expense allocation spreadsheet.