2. The following is a partiall. Cozy Bookstore. It reports departments. Allocate the to the three operating depa Allocation Base
2. The following is a partiall. Cozy Bookstore. It reports departments. Allocate the to the three operating depa Allocation Base
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:2. The following is a partially completed lower section of a departmental expense allocation for
Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five
departments. Allocate the expenses of the two service departments (advertising and purchasing)
to the three operating departments and provide the complete income statement.
Allocatlon of Expenses to Departments
Еxpense
Account Bal.
Advertising
Dept.
Purchasing
Dept.
Books
Magazines
Dept.
Newspapers
Dept.
Allocation Base
Dept.
$698,000
$24,000
$34,000
$425,000
$90,000
$125,000
Total department expenses..
Service department expenses
Advertising department.
Purchasing department.
Total expenses allocated to
operating departments..
Sales
?
.Purch, orders
Advertising and purchasing department expenses are allocated to operating departments
on the basis of dollar sales and purchase orders, respectively. Information about the
allocation bases for the three operating departments follows.
Department
Sales
Purchase Orders
Books ...
$495,000
516
Magazines....
198,000
360
Newspapers
207,000
324
Total.....
$900,000
1,200
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