Question

question 1:

Jessica Porter works in both the jewelry department and the cosmetics department of a retail store. She assists customers in both departments and arranges and stocks merchandise in both departments. The store allocates her $13,900 annual wages between the two departments based on the time worked in the two departments in each two-week pay period. On average, Jessica reports the following hours and activities spent in the two departments. Activities Hours Selling in jewelry department 49.0 Arranging and stocking merchandise in jewelry department 10.0 Selling in cosmetics department 16.0 Arranging and stocking merchandise in cosmetics department 11.0 Idle time spent waiting for a customer to enter one of the departments 8.0 Allocate Jessica’s annual wages between the two departments.

question 2:

Woh Che Co. has four departments: Materials, Personnel, Manufacturing, and Packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Indirect Expense		Cost	Allocation Base
Supervision	$	82,800	Number of employees
Utilities		53,000	Square feet occupied
Insurance		24,000	Value of assets in use
Total	$	159,800

Departmental data for the company’s recent reporting period follow.

Department	Employees				Square Feet				Asset Values
Materials		28				39,000				$	12,600
Personnel		7				6,500					3,150
Manufacturing		63				65,000					31,500
Packaging		42				19,500					15,750
Total		140				130,000				$	63,000

1. Use this information to allocate each of the three indirect expenses across the four departments.
2. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.
  

Answer 1

• Requirement 1

Supervision expenses	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	No. of employees
Material	No. of employees	28	140	20%	$82,800	$16,560
Personnel	No. of employees	7	140	5%	$82,800	$4,140
Manufacturing	No. of employees	63	140	45%	$82,800	$37,260
Packaging	No. of employees	42	140	30%	$82,800	$24,840
Totals		140		100%		$82,800
Utilities	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Square feet
Material	Square feet	39000	130000	30%	$53,000	$15,900
Personnel	Square feet	6500	130000	5%	$53,000	$2,650
Manufacturing	Square feet	65000	130000	50%	$53,000	$26,500
Packaging	Square feet	19500	130000	15%	$53,000	$7,950
Totals		130000		100%		$53,000
Insurance	Allcocation base	Numerator	Denominator	% of total	Cost to be allocated	Allocated Cost
Department:	Value of Asset in use
Material	Value of Asset in use	$12,600	63000	20%	$24,000	$4,800
Personnel	Value of Asset in use	$3,150	63000	5%	$24,000	$1,200
Manufacturing	Value of Asset in use	$31,500	63000	50%	$24,000	$12,000
Packaging	Value of Asset in use	$15,750	63000	25%	$24,000	$6,000
Totals		$63,000		100%		$24,000

• Requirement 2

	Supervision expenses	Utilities	Insurance	TOTAL
Material	$16,560	$15,900	$4,800	$37,260
Personnel	$4,140	$2,650	$1,200	$7,990
Manufacturing	$37,260	$26,500	$12,000	$75,760
Packaging	$24,840	$7,950	$6,000	$38,790
Totals	$82,800	$53,000	$24,000	$159,800