Question

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of...

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:

Office Expenses Total Allocation Basis
Salaries $ 45,000 Number of employees
Depreciation 31,000 Cost of goods sold
Advertising 65,000 Net sales
Item Drilling Grinding Total
Number of employees 1,000 1,500 2,500
Net sales $ 376,000 $ 564,000 $ 940,000
Cost of goods sold $ 129,200 $ 210,800 $ 340,000

The amount of depreciation that should be allocated to Drilling for the current period is:
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Answer #1

Cost of goods sold of Drilling = $129,200

Total cost of goods sold = $340,000

Depreciation expense = $31,000

Depreciation expense to be allocated to Drilling = Depreciation expense x Cost of goods sold of Drilling/Total cost of goods sold

= 31,000 x 129,200/340,000

= $11,780

The amount of depreciation that should be allocated to Drilling for the current period is = $11,780

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