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 (5) departments. Allocate the expenses of the two service departments (advertising and purchasing) to the three operating departments and provide the complete income statement. 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Provide general discussion on predetermined variable overhead criterion and its possible dependence on the activity for which it is used. Provide a variable costing income statement in which variable overhead is divided among different activities, and that each activity has its own predetermined variable overhead criterion. 

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 (5) departments. Allocate the expenses of the two service departments (advertising and purchasing) to the three operating departments and provide the complete income statement.

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.

 

Allocation 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
?
?
?
?
1
Transcribed Image Text:Allocation 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 ? ? ? ? 1
Department
Sales
Purchase Orders
Вooks
$495,000
516
Magazines.
198,000
360
Newspapers
207,000
324
Total..
$900,000
1,200
Transcribed Image Text:Department Sales Purchase Orders Вooks $495,000 516 Magazines. 198,000 360 Newspapers 207,000 324 Total.. $900,000 1,200
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