Question

Management of Wee Ones (WO), an operator of day-care facilities, wants the company's profit to be subdivided by center. The firm's accountant has provided the following data:
Center Budgeted Revenue Actual Revenue Budgeted Direct Costs Actual Direct Costs Downtown $ 342,000 $ 363,300 $ 310,000 $ 347,600 Irvine 598,500 622,800 573,500 521,400 H. Beach 769,500 743,900 666,500 711,000 Totals $ 1,710,000 $ 1,730,000 $ 1,550,000 $ 1,580,000
WO's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $74,000. Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices. How much advertising would be allocated to the Irvine center?

Answer 1

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