Reference no: EM131538771

Question: Over road Cycle Shop has two service departments (advertising and administration) and two operating departments (cycles and clothing). During 2011, the departments had the following direct expenses and occupied the following amount of floor space.

The advertising department developed and distributed 100 advertisements during the year. Of these, 76 promoted cycles and 24 promoted clothing. The store sold $300,000 of merchandise during the year. Of this amount, $225,000 is from the cycles department, and $75,000 is from the clothing department. The utilities expense of $64,000 is an indirect expense to all departments. Prepare a departmental expense allocation spreadsheet for Overroad Cycle 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, and

(4) the administrative department's expenses to the two operating departments based on the amount of sales. Provide supporting computations for the expense allocations.