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Marathon Running Shop has two service departments (advertising and administrative) and two operating departments(Shoes and Clothing). The table that follows shows the direct expenses incurred and square footage occupied by all four departments, as well as total sales for the two operating departments for the year 2019.
Square Feet Direct Expenses Department Sales 1,120 1,400 7,140 4,340 Advertising .... Administrative. $ 18,000 25,000 10
The advertising department developed and distributed 120 advertisements during the year. Of these, 90 promoted shoes and 30 promoted clothing. Utilities expense of $64,000 is an indirect expense to all departments. Prepare a departmental expense allocation spreadsheet for Marathon Running Shop. The spreadsheet should assign
(1) Direct expenses to each of the four departments,
(2) The $64,000 of utilities expense to the four departments on the basis of floor space occupied,
(3) The advertising department’s expenses to the two operating departments on the basis of the number of ads placed that promoted a department’s products,
(4) The administrative department’s expenses to the two operating departments based on the amount of sales. Provide supporting computations for the expense allocations.
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