Marathon Running Shop has two service departments (advertising and administration) and two operating departments (shoes and clothing). During 2013, the departments had the following direct expenses and occupied the following amount of floor space.
DepartmentDirect ExpensesSquare Feet Advertising$17,000 1,120 Administrative 18,400 1,440 Shoes 101,400 8,320 Clothing 12,100 5,120
The advertising department developed and distributed 120 advertisements during the year. Of these, 84 promoted shoes and 36 promoted clothing. The store sold $350,000 of merchandise during the year. Of this amount, $262,500 is from the shoes department, and $87,500 is from the clothing department. The utilities expense of $66,000 is an indirect expense to all departments.
Complete the departmental expense allocation spreadsheet for Marathon Running Shop. Assign (1) direct expenses to each of the four departments, (2) the $66,000 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, and (4) the administrative department’s expenses to the two operating departments based on the amount of sales.
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