Chapter 2, Problem 18P

PROBLEM 1-18 Direct and Indirect Costs; variable Costs LO1−1, LO1−4

The following cost data pertain to the operations of Montgomery Department Stores, Inc. for the month of July.

Corporate legal office salaries	$56,000
Apparel Department cost of sales—Evendale Store	$90,000
Corporate headquarters building lease	$48,000
Store manager’s salary—Evendale Store	$12,000
Apparel Department sales commission—Evendale Store	$7,000
Store utilities—Evendale Store	$11,000
Apparel Department manager’s salary—Evendale Store	$8,000
Central warehouse lease cost	$15,000
Janitorial costs—Evendale Store	$9,000

The Evendale Store is one of many stores owned and operated by the company. The Apparel Department is one of many departments at the Evendale Store. The central warehouse serves all of the company’s stores.

Required:

1. What is the total amount of the costs listed above that are direct costs of the Apparel Department?
2. What is the total amount of the costs listed above that are direct costs of the Evendale Store?
3. What is the total amount of the Apparel Department’s direct costs that are also variable costs with respect to total departmental sales?