National Retail has two departments, Housewares and Sporting. Indirect expenses for the period follow. Rent Advertising Insurance Total The company occupies 4,000 square feet of a rented building. In prior periods, the company divided the $80,000 of indirect expenses by 4,000 square feet to find an average cost of $20 per square foot, and then allocated indirect expenses to each department based on the square feet it occupied. The company now wants to allocate indirect expenses using the allocation bases shown below. Value of Insured Asset $ 50,000 50,000 $ 100,000 Department Housewares Sporting Total Housewares Sporting Total 2. Allocate indirect expenses to the two departments. Rent expense is allocated based on square feet occupied. Advertising expense is allocated based on total sales. Insurance expense is allocated based on the value of insured assets. Allocate $45,000 of rent using square feet occupied Square Feet Housewares Sporting Total $ 45,000 25,000 10,000 $ 80,000 $ Housewares Sporting Total Square Feet 1,800 2, 200 4,000 $ Allocate $25,000 of advertising using percentage of sales Sales Percent of Total S 1,800 2,200 4,000 Sales $ 280,000 220,000 $ 500,000 280,000 220,000 500,000 Percent of Total Cost Allocated 50,000 50,000 100 000 0% $ Allocate $10,000 of insurance using value of insured assets Assets Insured Percent of Total $ 0% $ 096 Cost Allocated 0 Cost Allocated 0
National Retail has two departments, Housewares and Sporting. Indirect expenses for the period follow. Rent Advertising Insurance Total The company occupies 4,000 square feet of a rented building. In prior periods, the company divided the $80,000 of indirect expenses by 4,000 square feet to find an average cost of $20 per square foot, and then allocated indirect expenses to each department based on the square feet it occupied. The company now wants to allocate indirect expenses using the allocation bases shown below. Value of Insured Asset $ 50,000 50,000 $ 100,000 Department Housewares Sporting Total Housewares Sporting Total 2. Allocate indirect expenses to the two departments. Rent expense is allocated based on square feet occupied. Advertising expense is allocated based on total sales. Insurance expense is allocated based on the value of insured assets. Allocate $45,000 of rent using square feet occupied Square Feet Housewares Sporting Total $ 45,000 25,000 10,000 $ 80,000 $ Housewares Sporting Total Square Feet 1,800 2, 200 4,000 $ Allocate $25,000 of advertising using percentage of sales Sales Percent of Total S 1,800 2,200 4,000 Sales $ 280,000 220,000 $ 500,000 280,000 220,000 500,000 Percent of Total Cost Allocated 50,000 50,000 100 000 0% $ Allocate $10,000 of insurance using value of insured assets Assets Insured Percent of Total $ 0% $ 096 Cost Allocated 0 Cost Allocated 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:National Retail has two departments, Housewares and Sporting.
Indirect expenses for the period follow.
Rent
Advertising
Insurance
Total
The company occupies 4,000 square feet of a rented building. In prior periods, the company divided the $80,000 of
indirect expenses by 4,000 square feet to find an average cost of $20 per square foot, and then allocated indirect
expenses to each department based on the square feet it occupied.
The company now wants to allocate indirect expenses using the allocation bases shown below.
Value of Insured
Assets
$ 50,000
50,000
$ 100,000
Department
Housewares
Sporting
Total
Housewares
Sporting
Total
2. Allocate indirect expenses to the two departments. Rent expense is allocated based on square feet occupied. Advertising expense
is allocated based on total sales. Insurance expense is allocated based on the value of insured assets.
Allocate $45,000 of rent using square feet occupied
Square Feet
Housewares
Sporting
Total
$ 45,000
25,000
10,000
$ 80,000
S
Housewares
Sporting
Total
Square Feet
1,800
2, 200
4,000
$
Allocate $25,000 of advertising using percentage of sales
Sales
Percent of Total
$
1,800
2,200
4,000
Sales
$ 280,000
220,000
$ 500,000
280,000
220,000
500,000
Percent of Total Cost Allocated
50,000
50,000
100,000
0% $
Allocate $10,000 of insurance using value of insured assets
Assets Insured Percent of Total
S
0% $
Cost Allocated
0%
Cost Allocated
$
0
0
0
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