Question

Assigning Traceable Fixed Expenses
Selected data for Colony Company, which operates three departments, follow:

		Department A	Department B	Department C
Inventory		$20,000	$72,000	$28,000
Equipment (average cost)		$180,000	$108,000	$72,000
Payroll		$607,500	$540,000	$202,500
Square feet of floor space		27,000	13,500	4,500

During the year, the company's fixed expenses included the following:

Depreciation on equipment				$30,000
Real estate taxes				9,000
Personal property taxes (on inventory and equipment)				14,400
Personnel department expenses				15,000

Assume that the property tax rate is the same for both inventory and equipment. Using the most causally related bases, prepare a schedule assigning the fixed expenses to the three departments. Hint: Not all fixed expenses are traceable to the three departments. One of these fixed costs should be considered a common cost and not traceable to the departments.

Do not round until your final answer. Round final answer to the nearest whole number.

		Department A	Department B	Department C
Depreciation		$Answer	$Answer	$Answer
Real estate taxes		Answer	Answer	Answer
Personal property taxes		Answer	Answer	Answer
Personnel dept. expenses		Answer	Answer	Answer

Answer 1

	Department A	Department B	Department C
Depreciation	15000	9000	6000
Real estate taxes	5400	2700	900
Personal property taxes	6000	5400	3000
Personnel dept. expenses	0	0	0

Note: Depreciation is assigned based on the equipment (average cost), real estate taxes based on square feet of floor space, and personal property taxes based on the inventory and equipment (average cost) The personnel department expenses are considered a common cost not traceable to the departments.

Calculations:

	Department A	Department B	Department C
Depreciation	=30000*180000/360000	=30000*108000/360000	=30000*72000/360000
Real estate taxes	=9000*27000/45000	=9000*13500/45000	=9000*4500/45000
Personal property taxes	=14400*200000/480000	=14400*180000/480000	=14400*100000/480000
Personnel dept. expenses	0	0	0