National Retail has two departments, Housewares and Sporting.Indirect expenses for the period follow.$ 45,00025,00010,000$ 80,000RentAdvertisingInsuranceTotalThe company occupies 4,000 square feet of a rented building. In prior periods, the companydivided the $80,000 of indirect expenses by 4,000 square feet to find an average cost of $20 persquare foot, and then allocated indirect expenses to each department based on the square feet itoccupied.The company now wants to allocate indirect expenses using the allocation bases shown below.Value of InsuredDepartmentHousevaresSquare Feet1,5602,440SalesAssets$ 340,000160,000$ 500,000$ 56,00044,000$ 100,000SportingTotal4,000Required:1. Allocate indirect expenses to the two departments using the allocation method used in prior periods.DepartmentSquare FeetRateTotalHousewaresSporting

Allocation of expenses is the allocation of expense to each department and the allocation of…

Answered: 1. Allocate indirect expenses to the…

Business

Accounting

1. Allocate indirect expenses to the two departments using the allocation method used in prior periods.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

National Retail has two departments, Housewares and Sporting.
Indirect expenses for the period follow.
$ 45,000
25,000
10,000
$ 80,000
Rent
Advertising
Insurance
Total
The company occupies 4,000 square feet of a rented building. In prior periods, the company
divided the $80,000 of indirect expenses by 4,000 square feet to find an average cost of $20 per
square foot, and then allocated indirect expenses to each department based on the square feet it
occupied.
The company now wants to allocate indirect expenses using the allocation bases shown below.
Value of Insured
Department
Housevares
Square Feet
1,560
2,440
Sales
Assets
$ 340,000
160,000
$ 500,000
$ 56,000
44,000
$ 100,000
Sporting
Total
4,000
Required:
1. Allocate indirect expenses to the two departments using the allocation method used in prior periods.
Department
Square Feet
Rate
Total
Housewares
Sporting

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