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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 AmountRent Square feet of floor space $ 30,000Advertising Amount of dollar sales 42,000Administrative Number of employees 63,000The following information is available for its three operating (sales) departments: Department Square Feet Dollar Sales Number of employeesA 3,600 $ 298,000 12B 4,000 $ 318,000 14C 4,200 $ 444,000 16Totals 11,800 $ 1,060,000 42What is the total advertising expense allocated to Department B?

Question

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 AmountRent Square feet of floor space 30,000AdvertisingAmountofdollarsales42,000AdministrativeNumberofemployees63,000Thefollowinginformationisavailableforitsthreeoperating(sales)departments: DepartmentSquareFeetDollarSalesNumberofemployeesA3,600 30,000Advertising Amount of dollar sales 42,000Administrative Number of employees 63,000The following information is available for its three operating (sales) departments: Department Square Feet Dollar Sales Number of employeesA 3,600 298,000 12B 4,000 318,00014C4,200 318,000 14C 4,200 444,000 16Totals 11,800 $ 1,060,000 42What is the total advertising expense allocated to Department B?

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Solution

To calculate the total advertising expense allocated to Department B, we need to follow these steps:

  1. Determine the proportion of Department B's dollar sales to the total dollar sales. This is done by dividing Department B's dollar sales by the total dollar sales.

    Department B's dollar sales = 318,000Totaldollarsales=318,000 Total dollar sales = 1,060,000

    Proportion of Department B's dollar sales to total dollar sales = 318,000/318,000 / 1,060,000 = 0.3 (approximately)

  2. Multiply the total advertising expense by the proportion calculated in step 1. This will give us the total advertising expense allocated to Department B.

    Total advertising expense = $42,000

    Total advertising expense allocated to Department B = 42,0000.3=42,000 * 0.3 = 12,600

So, the total advertising expense allocated to Department B is $12,600.

This problem has been solved

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