Question

g Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments: Expense Basis for allocation Amount Rent Square feet of floor space $ 24,000 Advertising Amount of dollar sales $ 30,000 Administrative Number of employees $ 45,000 The following information is available for its three operating (sales) departments: Department Square Feet Dollar Sales Number of employees A 3,000 $ 280,000 6 B 3,400 $ 300,000 8 C 3,600 $ 420,000 10 Totals 10,000 $ 1,000,000 24 What is the total advertising expense allocated to Department B?

Answer 1

Answer: $9,000

Explanation:

Advertising is allocated on the basis of dollar sales at $30,000.

There was a total of $1,000,000 in dollar sales.

$300,000 in dollar sales was allocated to department B

To find the advertising expense for Department B therefore is,

= (Advertising Expense / Total Dollar Sales) * Dollar sales allocated to Department B

= (30,000/ 1,000,000) * 300,000

= $9,000

$9,000 is the total advertising expense allocated to Department B.