Question

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 $30,000 Number of employees

Depreciation 20,000 Cost of goods sold

Advertising 40,000 Net sales

Item Drilling Grinding Total

Number of employees 1,000 1,500 2,500

Net sales $325,000 $475,000 $800,000

Cost of goods sold $75,000 $125,000 $200,000

The amount of the total office expenses that should be allocated to Grinding for the current period is:

$600,000.

$90,000.

$54,250.

$45,000.

$35,750.

this is multiple choice question please read the question carefully

Answer 1

Correct answer: $54250 (please see the calcualtion in the below tables)

Office expenses	total	Allocation basis
Salaries	30000	no. of enployees
Depreciation	20000	Cost of good sold
Advertising	40000	Net sales

Particulars	item drilling	Grinding	Total
no. of employees	1000	1500	2500
Net sales	325000	475000	800000
Cost of goods sold	75000	125000	200000

Particulars	Grinding
Salaries ({Salaries expense*no. of employees in Grinding}/total employees)	18000
Depreciation ({Depreciation expense*COGS of Grinding}/total cogs)	12500
Advertising ( {Advertising expense* net sales in grinding }/ total net sales)	23750
Total office expense of Grinding	54250

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