Exercise 22-3 (Algo) Service department expenses allocated to operating departments LO P2
Lucla Company has two service departments: Office and Purchasing. Total expenses for the Office are $71,000 and for Purchasing are $78,900. Expenses for the Office are allocated to operating departments based on sales. Expenses for Purchasing are allocated to operating departments based on purchase orders.
Allocate the expenses from (a) the Office and (b) Purchasing to each of the company's three operating departments using the given information.
| Department | Sales | Orders |
|--------------|---------|--------|
| Books | $201,600| 1,225 |
| Magazines | $92,400 | 725 |
| Newspapers | $126,000| 550 |
| Total | $420,000| 2,500 |
| Office | Allocation Base | Percent of Allocation Base | Cost to be Allocated | Allocated Cost |
|--------------|-----------------|----------------------------|----------------------|----------------|
| Department | 2 | Numerator | Denominator | % of Total |
| Books | | | 0 | |
| Magazines | | 2 | 0 | |
| Newspapers | | 8 | 2 | |
| Totals | +2+2 | 5 | | |
| | Allocation Base | Percent of Allocation Base | Cost to be Allocated | Allocated Cost |
|--------------|-----------------|----------------------------|----------------------|----------------|
| Purchasing | | | | |
| Department | Allocation base | Numerator | Denominator | % of Total | Cost to be Allocated | Allocated Cost |
| Books | â—» | â—» | | 0 | |
| Magazines | | √2√2 | | √18 | |
| Newspapers | | | 0 | 1 | 0 |
