Question

Maroc acee Department Store has three departments, and it conducts advertising campaigns that benefit all departments. Advertising costs are $116,000 this year, and departmental sales for this year follow.
Col1 Department Department1 Department2 Department13
Col2 Sales $ 273,000 445,900 191,100
How much advertising cost is allocated to each department if the allocation is based on departmental sales?

Answer 1

Answer:

Department 1: $34,800

Department 2: $56,840

Department 3: $24,360

Explanation:

Statement showing allocation of advertisement expenses based on departmental sales:

Department 1:

Percentage of Total sales = (Department 1 sales ÷ Total sales) × 100

                                           = ($273,000 ÷ 910,000) × 100

                                           = 30%

Allocated amount:

= Percentage of Total sales × Advertising costs

= 30% × $116,000

= $34,800

Department 2:

Percentage of Total sales = (Department 2 sales ÷ Total sales) × 100

                                           = ($445,900 ÷ 910,000) × 100

                                           = 49%

Allocated amount:

= Percentage of Total sales × Advertising costs

= 49% × $116,000

= $56,840

Department 3:

Percentage of Total sales = (Department 3 sales ÷ Total sales) × 100

                                           = ($191,100 ÷ 910,000) × 100

                                           = 21%

Allocated amount:

= Percentage of Total sales × Advertising costs

= 21% × $116,000

= $24,360